BBVA made a successful return to benchmark cédulas issuance with its first such deal since 2016 today (Wednesday), a €1.5bn four-and-a-half year that attracted some €2.7bn of orders and was priced with a limited NIP, but NordLB found only modest demand for a long seven year Pfandbrief.

Following a mandate announcement yesterday (Tuesday), Banco Bilbao Vizcaya Argentaria leads BBVA, Commerzbank, Helaba, HSBC and Natixis went out with guidance of the mid-swaps plus 32bp area for the July 2027 euro benchmark cédulas hipotecarias, expected ratings Aa1/AAA (Moody’s/DBRS). After demand peaked at around €2.85bn, the new Spanish issue was priced at plus 27bp on the back of a final book above €2.7bn.

BBVA’s last euro benchmark covered bond was a €1bn 10 year in November 2016.

“By pre-announcing and coming sub-five years, they have ensured that they have appealed to the broadest possible investor base, to great effect,” said a banker at one of the leads. “They probably benefited from some scarcity value, but doing something in that part of the curve, which continues to be the sweet spot, very much helped them achieve a NIP at the low end of the recent spectrum.”

He put the new issue premium at around 3bp. Compatriot Santander on Tuesday of last week (3 January), priced €2.5bn three and €1bn seven year benchmarks at 22bp and 47bp, respectively, with the shorter tranche seen coming with a new issue premium of around 4bp.

A pick-up in cédulas supply had been anticipated for 2023, with issuers having updated their programmes following the implementation of the EU Covered Bond Directive and increasing market-based funding to replace TLTROs. The €5bn of cédulas supply from the two national champions is already around half the amount some analysts had pencilled in for the whole year from the jurisdiction.

Norddeutsche Landesbank (NordLB) also hit the market this morning, after a mandate announcement yesterday. Leads Crédit Agricole, DZ, Erste, Helaba, ING and NordLB opened books with guidance of the mid-swaps plus 15bp area for the March 2030 euro benchmark, expected rating Aa1. After around an hour and a quarter, they reported books above €500m, excluding JLM interest, and after around two-and-a-quarter hours, they set the size at €500m on the back of books above €650m, including €35m of JLM interest, with the guidance unchanged at the 15bp area. They ultimately priced the new issue at 15bp on the back of a final book above €650m.

A lead banker said that the outcome fell short of expectations.

“The question is, where did this come from?” he said. “I’m not sure. Perhaps it wasn’t exactly generously priced and it was a little on the long side.”

The lead banker saw fair value at around 7bp, implying a new issue premium of 8bp. He noted that the Pfandbrief came in the wake of 10 euro benchmark tranches from Germany already this year and said that supply could have weighed on demand, while the “euro benchmark” size language could also have contributed to uncertainty about the outcome.

“I guess a few elements added up,” he said. “In any case, it was a solid €500m, with a final book of €650m.

“We’ll have to see to what this means for the following transactions.”

A €500m no-grow six year mortgage Pfandbrief for compatriot Deutsche Pfandbriefbank (pbb) was announced today and is expected to be executed tomorrow (Thursday). BNP Paribas, Crédit Agricole, Credit Suisse, DZ and LBBW are leads for the mortgage Pfandbrief, expected rating Aa1.

Also launched today after an announcement yesterday was a €500m no-grow four year mortgage Pfandbrief for Raiffeisen-Landesbank Steiermark, the fourth Austrian benchmark of the year. Leads BayernLB, Commerzbank, Erste, LBBW and RBI opened books with initial guidance of the mid-swaps plus 27bp area for the January 2027 issue, expected rating Aaa. After around three-quarters of an hour, they reported books above €500m, excluding joint lead manager interest, and after a little over two hours, they revised guidance to plus 25bp+/-1bp, will price in range, on the back of books above €830m, including €45m of JLM interest. The deal was ultimately price at plus 24bp and the final book was €880m.

Next up from the country will be UniCredit Bank Austria, which is expected with a long three year (July 2026) euro benchmark tomorrow after a mandate announcement today. BayernLB, Erste, HSBC, ING, Natixis and UniCredit.