Credit Suisse returned to the euro covered bond market after an eight year absence last week, with its €750m (CHF741m) three year deal offering both the Swiss bank and euro investors diversification, while the highest spread on a euro benchmark this year was nevertheless inside Swiss domestic levels.

Credit Suisse issued internationally in euros and US dollars from 2010 to 2014 via Credit Suisse AG, then – following a restructuring of the group according to Swiss regulatory changes – resumed covered bond issuance domestically via a Credit Suisse (Switzerland) Ltd programme in June 2019.

Since its inauguration, some CHF2bn has been issued in Swiss francs off the successor programme, with last Thursday’s transaction representing the first diversification away from Credit Suisse’s home market.

“It was always the plan to gradually introduce the euro issuance capability a couple of years after launching the programme,” Michael McCormick, head of DCM advisory at Credit Suisse, told The CBR. “It is important to have access to the deepest pool of liquidity, which is the euro market.”

While programme documentation had from the start allowed for issuance in currencies other than Swiss francs, further work was necessary to allow for covered bond swaps, he noted, and this was done in time for the programme’s latest update in June. At industry events, such as ECBC and Euromoney events in Vienna in September, and on an ad hoc basis, the Credit Suisse team meanwhile engaged with investors to introduce the programme, which like its predecessor is contractual in nature.

“This gave investors some time to familiarise themselves with the features of the programme,” said McCormick. “Structured covered bonds are not as common as they used to be, and that naturally leads to more questions on how everything works. The transaction is also subject to Swiss withholding tax, and investors need time to understand that and how to reclaim it.

“And then ultimately, we ended up in this part of the year with the possibility of doing the inaugural euro trade.”

The bank on Tuesday of last week announced that it had mandated Commerzbank, Danske, DZ, Helaba, ING and Natixis alongside its investment bank to arrange investor meetings that day and the next, ahead of a potential short dated euro debut, but retaining the flexibility to either enter the market immediately thereafter or wait until the new year.

The issuer entered the market on Thursday morning, going out with initial guidance of the mid-swaps plus 75bp area for a euro benchmark-sized December 2025 issue, expected rating AAA from Fitch. The spread was set at 73bp on the back of more than €1bn of demand, including €110m of joint lead manager interest, and the size was ultimately set at €750m on the back of a book above €1.15bn, pre-reconciliation, with the final book being €1.1bn-plus.

“For an inaugural trade and a contractual covered bond, we’re very happy with the time and orders investors put into it,” said McCormick. “Now that we have established the name with a successful benchmark-sized transaction, we would expect to see more investors get involved in future, and we look forward to helping the issuer return next year and become a regular issuer in euros.”

Some syndicate bankers away from the leads were taken aback by the pricing of 73bp over mid-swaps, it being the highest spread paid on a euro benchmark this year. One cited the “noise” around the Credit Suisse name, but another suggested “all funding is good funding at current times”.

“Not only the restructuring the bank is currently going through, but also the approaching year-end is likely to be among the challenges CS will have to face in marketing this project,” said an analyst in the run-up to launch. “This may deter some investors, but for others it could make the issue all the more interesting from a spread perspective.”

Although the leads included non-EU covered bonds such as Australian and UK names in pre-announcement comparables, Japanese levels were seen as key, given that they are the main structured covered bonds being issued, apart from a Deutsche Bank programme, and with the most similar regulatory treatment. Sumitomo Mitsui Banking Corp November 2023s were seen at 19bp, mid, its September 2025s at 38bp and June 2026s at 41bp.

Credit Suisse’s 75bp guidance for its debut trade compared with a potential level in the mid-60s that a new Japanese issue might have to pay, suggested a lead banker, implying that a limited price had been paid for entering the market. He noted that the Swiss trade tightened some 5bp in secondary after launch.

Bankers in Zurich also saw the pricing of the euro benchmark well inside what Credit Suisse might currently achieve in the Swiss franc market.

McCormick said that the absence of Swiss covered bond supply in euros over the past eight years had worked in the issuer’s favour, while distribution had been skewed towards asset managers less concerned about regulatory treatment. They were allocated 72%, while banks took 16%, pension funds and insurance companies 10%, and others 2%. Germany and Austria took 43%, the Nordics 19%, the UK and Ireland 17%, the Netherlands 14%, Switzerland 4%, and others 3%.