A €1bn MünchenerHyp Pfandbrief yesterday (Thursday) confirmed the availability of 10 year funding for core names after Bawag on Wednesday issued in that tenor the biggest Austrian benchmark, but a lacklustre €500m seven year for Jyske raised questions over the scope of the market’s recovery.

After a three week summer break, euro benchmark supply restarted with a bang on Tuesday as Berlin Hyp priced a €1bn three year green Pfandbrief on the back of the biggest book in over two years, and by yesterday six deals totalling €6bn had been launched, with some syndicate banker taken aback by the scale of the reopening.

And after Berlin Hyp’s three year and a €1bn long five year for SR-Boligkreditt had confirmed demand for short and medium tenors on Tuesday, Bawag PSK successfully tested the long end on Wednesday, sizing its deal at €1.25bn on the back of a €2.2bn final book and tightening pricing from the mid-swaps plus 24bp area to 20bp, implying a new issue premium of 3bp-4bp, according to a lead banker. As well as being the largest Austrian benchmark covered bond, it was the first under the country’s updated and unified legislation.

“It was exciting for being the first in the tenor post-summer and it was very successful, while the new law seems to have been accepted by everyone,” said the lead banker. “To be honest, we had not been 100% sure when we started this about the dynamics of the 10 year maturity, and we were positively surprised by the response.

“It seems that this rates volatility that will keep us busy for some time is nothing that is overly concerning for many accounts.”

He attributed the strength of demand partly to an anticipated supply/demand imbalance as euor benchmark issuance eases after a hectic first half of the year. However, Rabobank analysts suggested that relative calm over the summer compared to the “very chaotic period” that preceded it afforded issuers the chance for this week’s long dated issuance, but the market could again prove more challenging.

“With the world’s major central banks forging ahead to hike rates as they attempt to bring inflation back to ground (or target),” they said, “it is clear that they are a long way from mission accomplished and the months ahead are going to prove challenging for them, the economy and the market broadly.”

And another syndicate banker said that while bank treasuries were heavy involved in the 10 year supply, insurance companies were less present.

“You might expect them to be involved because of the coupons,” he said, “but they still expect yields to rise and are perhaps more cautious.”

Bank treasuries took 54% of MünchenerHyp’s €1bn 10 year mortgage Pfandbrief, and central banks 25%. The German issuer sized its deal at €1bn on the back of more than €2.2bn of demand from 73 accounts, tightening pricing from the plus 9bp area to 5bp, implying a new issue premium of around 2bp and equivalent to 85.2bp over the Bund.

“The high attractiveness of the yield vis-à-vis government bonds is currently reinforcing demand for Pfandbriefe,” said Louis Hagen, MünchenerHyp CEO. “At the same time, the great interest shown by investors impressively confirms our refinancing strategy.”

A long seven year for Jyske Realkredit yesterday proved the most difficult of the week’s trades, as the deal was sized at €500m on the back of a €600m final book, including €30m of joint lead manager interest, with pricing tightened from 16bp to 14bp.

“The market is open and the backdrop is quite sound,” said a banker at one of the leads, “but you can see the market is still quite cautious when it comes to non-Eurozone issues and indeed longer dated tenors. We have seen a bear market rally, but any investors still regard the market as too tight and expect spreads to widen further, especially for non-Eurozone names.

“Only core Eurozone names like Germans can come really aggressively. When it comes to names from outside the Eurozone, it must be maximum five years if you want decent execution, or you have to pay up, at least 7bp, 8bp if not 10bp of new issue concession if you want to attract a €1bn book.”

He put the new issue premium paid by Jyske at around 5bp, but other market participants put it closer to 7bp. A syndicate banker away from the leads suggested the Danish trade had suffered in comparison to a €1.25bn 4.75 year deal from SpareBank 1 Boligkreditt also launched yesterday.

The Norwegian deal started with guidance of the 14bp area and was ultimately priced at 9bp, with a lead banker putting the new issue premium at 3bp.

“Investors demonstrated low pricing sensitivity and books continued to grow into the close, with total orders in excess of €2bn,” he said, “hence the issuer was able to both price at the tightest possible spread and for the maximum targeted issue size.”