Danish Ship Finance postponed a €500m no-grow five year covered bond issue after opening books this (Wednesday) morning, as the broader primary market was afflicted by investor fatigue and malaise in the face of heavy supply and ongoing volatility.

Danish Ship Finance (DSF, Danmarks Skibskredit) had on Monday announced plans for a €500m no-grow five year issue to be launched after investor calls in the first two days of the week, subject to market conditions. The new issue was also being planned in conjunction with a switch tender offer, a strategy DSF had used before.

However, after opening books shortly before 9am CET today, the leads failed to generate sufficient demand to make execution feasible, and at around 1.15pm CET they announced the deal was being postponed.

“[Danmarks Skibskredit] would like to thank investors for their credit work and the interest expressed,” they said. “The issuer will look to re-engage with investors in due course when markets permit.”

The announcement came shortly after German triple-A rated SSA Erste Abwicklungsanstalt had postponed a two year US dollar issue, reflecting the broader malaise in the market.

“They both sort of succumbed to pressure and decided it was better to do no deal than a bad deal,” said a syndicate banker away from DSF’s deal, “and indeed, “it’s best not to squeeze out a deal this market doesn’t want or need.

“It’s always odd for both the issuer and the leads to do so, but if the proper response is stepping down, then so be it.”

Another banker said conditions had not significantly changed from yesterday – when three euro benchmark covered bonds were priced, albeit with modest results in line with recent weeks – but that the market badly needs a break from supply.

“It’s perhaps just that the degree of exhaustion may have not quite been so bad yesterday but was unbearable today,” he added.

A syndicate banker at one of DSF’s leads echoed this and said the challenge it faced was exacerbated by the issuer being “off the beaten track” and a degree of larger price discovery being required.

“In that case, you probably need almost bull market conditions,” he said, “or at least where the last trades have been helpful, so investors feel more compelled to buy the next one and the one after that. And obviously had it been a triple-A German, French or Canadian issue today, it would probably have fared better. But investors basically told us that they’d probably skip this one, because it’s a little bit too volatile.

“So it would have been completely wrong to continue and the issuer took the right decision – however sad that may be, with it being a great issuer. It can happen to the best of people, and now we look to the future.”

Yesterday, Austria’s Bawag PSK priced a €750m March 2030 issue at 14bp, 1bp inside the middle of guidance on the back of €1.1bn of orders good at re-offer, while Royal Bank of Canada sold a €1bn seven year at 16bp, on the back of a €1.3bn final order book and 2bp inside the middle of initial guidance. Lead bankers put the new issue premiums at 7bp and 6bp, respectively.

“Both deals worked decently within what current conditions allow,” said a syndicate banker. “There are no blow-outs at the moment, but there are solid deals, and both of these within their own parameters were solid, and this already is an achievement.”

Bank of Queensland meanwhile yesterday sold a €600m five year CPT at 30bp on the back of a final book above €665m and in the middle of guidance.

“With the benefit of hindsight,” said the DSF lead banker, “we should probably have heard the canary singing a bit louder. But they all got the books filled, even above €1bn, and even in seven years.”

While yesterday’s issuers all paid new issue premiums above the averages seen in recent weeks, the banker said such calculations are rather academic in today’s market.

“Investors simply want more protection from bad performance,” he said.

DSF had gone out with guidance of the mid-swaps plus 37bp area for its five year, which the lead banker said represented a theoretical pick-up of 8bp-9bp.

“Given the handful of trades in the last couple of weeks that have basically priced where they started,” he added, “we were fully prepared for pricing at or close to that.”

The market is now set for a break, with public holidays in the UK on Thursday and Friday, and in continental Europe on Monday, but syndicate bankers said banks are likely to continue to target new issues given that conditions are not expected to improve significantly.