A €3.5bn dual-tranche cédulas blockbuster for Santander on Wednesday opened Directive-era Spanish supply and topped off the busiest August in a decade, although a €500m short eight year for Hypo Noe yesterday suggested fatigue towards heavy Austrian supply, at least.

Euro benchmark supply of €14.75bn last month is the highest for the month of August since 2011.

Banco Santander’s new issue is meanwhile the biggest euro benchmark transaction since before the financial crisis, its biggest ever covered bond issue, and the first from the Spanish national champion since a €2.5bn dual-tranche issue in February 2020.

Its transaction was also the first covered bond from the country since its implementation of the EU Covered Bond Directive via Royal Decree Law 24/2021, with the jurisdiction having experienced the most substantial changes to its framework of any member state.

Following initial guidance of the 25bp over mid-swaps area for a five year tranche and the 45bp area for a 10 year tranche, leads BNP Paribas, Commerzbank, ING, Santander, SG and UniCredit amassed over €6bn of orders for the trade (rated Aa1), allowing for the pricing of €2.25bn and €1.25bn tranches at 20bp and 42bp, respectively.

“Even having a batch of issuances on screens today (more than 10 new issues combining euros and sterling), books grew rapidly, reaching €4bn and €2bn in the five and 10 year tranches, respectively,” said Silvana Borgatti, head of funding at Banco Santander. “Both tranches had a notable granularity and investor quality.”

Syndicate bankers away from the leads were impressed by the Spanish trade – only the third of the year and the first since a €1bn seven year for Sabadell in May.

However, the initial guidance on the five year tranche was deemed generous, with fair value put at around 12bp-13bp over, even if bankers acknowledged that determining an exact number was not straightforward.

“25bp seemed very juicy,” said one. “I know that starting much tighter than 25bp on a five year when you have 45bp on a 10 year would make it a very steep curve, but it was too wide versus where some of the core names are trading.

“To me, if you have a €4bn book and the bonds are already trading 3bp-4bp tighter, it’s just that you left bips on the table. Had they started at 23bp, they could have easily ended around 18bp.”

Bankers were nevertheless generally positive about the overall outcome.

“They successfully collected quite a few billion euros,” said another syndicate banker, “so they can’t have gone too wrong.”

HSBC SFH France also successfully tapped the market on Wednesday, as leads ABN Amro, Crédit Agricole, DZ, Helaba, HSBC and Natixis priced a €500m no-grow 10 year at 25bp following initial guidance of the 30bp area and on the back of books above €2bn, excluding joint lead manager interest.

“This was what the issuer wanted to achieve,” said a syndicate banker at one of the leads.

He put fair value in the low 20s and said relative value versus government bonds was key to helping the issuer attract such strong demand despite it being one of France’s less familiar names and going through the process of being absorbed into the My Money Group.

Hypo Noe launched the first euro benchmark of September yesterday, but the deal marked an in auspicious start to the month, the €500m short eight year deal being tightened just 1bp from the middle of initial guidance of the 20bp area. Leads BNP Paribas, Erste, LBBW, NordLB and UBS reported a book of above €680m, including €80m of JLM interest, at the time they set the spread at 19bp, but no final book update was provided.

However, syndicate bankers attributed the muted demand to the weight of supply from Austria this year, which has topped €10bn, versus some €4bn in 2021. One said that while a €750m 10 year for RLB Noe-Wien last week had gone slower than a €1.25bn 10 year for Bawag PSK the previous week due to pricing and tenor considerations, the pricing and tenor of Hypo Noe’s trade might have been less troublesome.

“To me, it’s simple,” he added. “There’s just teen too much Austrian covered bond supply.

“It would be interesting to see what kind of demand they would get for a five year, because I think there they can still have better traction, whereas for anything longer they maybe have to rely more on domestic accounts and lines are starting to get quite full.

The only planned euro benchmark to have been officially announced and which could hit the market early next week is a five year for Macquarie Bank, for which investor marketing was conducted this week. The latest ECB governing council meeting on Thursday is expected to dampen supply later in the week.