Kookmin Bank is targeting a three-and-a-half year euro benchmark for launch at the start of next week despite primary market conditions remaining difficult, with the South Korean’s mandate being announced as the ECB held an emergency governing council meeting today (Wednesday).

BNP Paribas, Citigroup, Crédit Agricole, ING, LBBW and Societe Generale have the mandate for the Reg S sustainability covered bond, for which investor calls were held today.

As is typical for South Korean covered bond issuers, Kookmin is understood to have had limited room for manoeuvre in the timing of its new issue, leaving it and its leads with the challenge of navigating difficult primary market conditions.

The only euro benchmark since last Wednesday (8 June), a €500m long four year Pfandbrief for Aareal yesterday (Tuesday), had limited oversubscription and was priced in the middle of initial guidance with a new issue premium of as much as 10bp. With the primary market empty this morning, market participants had already been bracing for the Federal Reserve’s latest interest rate rise today, when news of an emergency European Central Bank meeting emerged this morning.

In the wake of widening of peripheral government bond spreads, the ECB concluded its meeting by stressing that it will apply flexibility in PEPP reinvestments and accelerate the completion of an anti-fragmentation instrument for consideration by the governing council. The BTP-Bund spread had narrowed sharply on news of the meeting and remained tighter in the wake of the announcement.

With an uncertain FOMC decision due this evening, parts of the EU on holiday tomorrow (Thursday), and a Friday mandate announcement leaving little time for preparation, Kookmin’s plans were announced this morning against the better backdrop, with a view to launch on Monday, although a syndicate banker noted the challenges facing any new issue.

“Fingers crossed that Monday is a good day and they can pull the trigger, build the books and price it,” he said. “If not, it won’t be the first or the last one this year to have announced a deal, pre-marketed and not execute – we are back to the old times where there is a big element of gut feeling in any decision you are taking.

“I don’t see the ECB as a game-changer,” the banker added. “The big question is what happens overnight, whether or not we have a 75bp hike, and how the market reacts to that.”

According to comparables circulated by the leads today, Kookmin July 2025s were quoted at mid-swaps plus 14bp, mid, and October 2026s at 17bp.

Another syndicate banker said the short maturity should help execution, but pricing considerations will be paramount.

“I expect them to come with something clearly and definitely consensual versus what people could expect from a name like Kookmin in current market condition,” he said.