A trio of euro benchmarks and a refilling pipeline saw the covered bond market resume its record-breaking pace today (Monday), with the short end of the curve remaining the focus and NIPs still elevated, and Caffil, MünchenerHyp and others expected in the coming days.

After a €1bn long five year Pfandbrief from Deutsche Bank was the only euro benchmark last week, ANZ, CFF and Sparebanken Sør hit the market this morning with an aggregate €3.85bn of supply, and Caffil and MünchenerHyp are among issuers expected tomorrow (Tuesday), following mandate announcements today.

“For a while, we had the anticipation that a pipeline was building, post-results,” said a syndicate banker, “with people waiting to get some of the hard data out of the way, and then looking again to the market.

“Everyone who feels like doing something is getting increasingly cornered in terms of timeline,” he added. “The closer we draw to December, the more challenging it will most likely become, so let’s go!”

Another banker said the market is clearly open for covered bonds as well as other FIG supply.

“It’s like the week before last,” he said, “with tonnes of issuance. NIPs are creeping higher and sub-five years is still the place to be to keep new issue concessions reasonably low, or below 15bp.

“The Bund-asset swap spread came down a bit from the wides we saw a couple of weeks ago,” he added, “but valuations of covered bonds are still quite good. So, a very decent bid for covered bonds, albeit at the elevated new issue concessions, with investors getting a little bit greedier now.”

Following a mandate announcement on Friday, Australia & New Zealand Banking Group (ANZ) attracted over €2.3bn of demand to a two year issue, allowing it to tighten pricing from guidance of the mid-swaps plus 17bp area to 14bp and size the transaction at €2bn (A$3.1bn). The new issue is the Australian’s largest ever euro benchmark, and comes after Germany’s LBBW opened the maturity with a €1bn two year on 11 October and Canada’s Bank of Nova Scotia on 24 October issued a €2bn two year.

“That’s an established format now,” said a banker away from the leads. “It’s the easiest place to park your cash if you’re an investor, these very, very short dated issues. And the non-Eurozone issuers pay a good spread. So that was very quickly executed.”

In contrast, a long four year issue for Compagnie de Financement Foncier (CFF) was relatively slow, if solid, according to syndicate bankers. The French issuer went out with guidance of the 16bp area and tightened to 14bp, ultimately pricing a €1.35bn deal on the back of some €1.7bn of orders.

A syndicate banker cited uncertainty over the potentially large size of the transaction, CFF’s third and biggest euro benchmark of the year, as slowing demand.

“There’s a bit of a chicken and egg game with the issuer waiting for the books to grow while investors are waiting for more clarity on terms,” he said. “In the end, €1.35bn indicated they were prepared to be undogmatic and left 7bp-8bp on the table.

“Nothing wrong with this, and it worked decently, but a bit less sparkle than, say, ANZ, particularly given that a French long four year should be a bit of a no-brainer.”

A €500m (NOK5.1bn) no-grow three year green covered bond for Sparebanken Sør Boligkreditt was thrice subscribed, allowing the Norwegian issuer to tighten pricing from the 16bp area to 11bp, limiting its new issue premium to 5bp-6bp.

“€1.5bn for a small infrequent issuer was very strong, for sure,” said a banker away from the leads. “However, given that it is green and quite rare short dated supply from the Nordics, I wonder if they weren’t a smidge generous – if they’d started tighter, perhaps they could have landed at 9bp or 10bp.”

Caffil has mandated a five year green benchmark that is expected to be launched tomorrow, via BNP Paribas, ING, La Banque Postale, LBBW and Natixis.

The euro benchmark will be the French issuer’s first since a €1bn long six year on 13 October that the Eurosystem exceptionally did not participate in for CBPP3. Syndicate bankers today said they expect the Banque de France to participate in the new issue.

“It seems that everyone is ready and willing to believe that this was a technical failure on the last Caffil,” said one, “and since then there has been ongoing proof of the fact that the ECB is still playing with 20%, for what it’s worth. So I think the story won’t repeat itself and they will have the Eurosystem participating.”

MünchenerHyp is also due tomorrow, with a short five year (August 2027) mortgage Pfandbrief, via Credit Suisse, DZ, Helaba, NordLB and UBS.

The German issue is expected to prove relatively straightforward, but syndicate bankers raised two questions over forthcoming supply. Firstly, whether supply will remain confined to the short end.

“What I’m looking for is if anybody dares to go a bit longer,” said one banker, “because, to be honest, it doesn’t take a PhD in finance to bring a three year covered that is cheap, right? It is the question now for those who need a little bit more duration: will the market be ready for them?”

And secondly, how resilient spreads will prove should issuers follow the example of the likes of ANZ and CFF in sizing trades.

“It’s perfectly fine to take everything out of the book,” said a syndicate banker, “but if we have too many that do so, at some point that could make things a little more tricky – there’s already been a little bit of repricing in the last few weeks.”