The euro covered bond market experienced its busiest day of 2023 today (Monday) as six tranches totalling €7bn hit screens, yet the supply from four names was all well oversubscribed, allowing for limited new issue premiums as issuers leveraged their returning pricing power.

The volume and number of tranches are more than on any other day this year, while no more than four issuers have hit the market with euro benchmarks on a single day. The slew of supply comes after new issuance last week found record-breaking demand for covered bonds despite a surprise cut in the Eurosystem CBPP3 bid from 20% to 10%.

“The market is still on fire,” said a syndicate banker involved in today’s issuance. “Maybe not red hot like last week when everything just exploded – books sizes are a bit more moderate and issuers are paying maybe a basis point or so more in new issue premiums – but at the end of the day, they all worked very well on a very busy day.”

This was borne out by the ability of the market to comfortably absorb not one, but two French dual tranche trades: €750m (no-grow) three and €1.5bn nine year tranches for SG SFH, and €1.75bn long fours and €750m 10s for Crédit Mutuel Home Loan SFH. They both achieved strong oversubscription, while SG was able to achieve NIPs of 1bp and 3bp at re-offer spreads of minus 1bp and 27bp, respectively, while its compatriot’s paper was priced flat to its outstandings and with a 1bp-2bp premium at re-offers of 15bp and 32bp.

SG SFH was even able to tighten the pricing on its short-dated tranche by 6bp from initial guidance of the 5bp over mid-swaps area to minus 1bp.

“Of course, this negative surprised some investors, who turned their backs on the deal,” said a syndicate banker at one of the leads. “But investors have to accept that issuers have pricing power again after having suffered for about a year.”

SG achieved a final book, pre-reconciliation and excluding joint lead manager interest, of more than €2.75bn on its three year and more than €2.35bn on its nine year, while Crédit Mutuel’s books were above €2.6bn for the long fours and over €1.25bn for the 10s.

“The main takeaway is that they were able to take a good chunky volume out of the market in a relatively short space of time,” said a banker at one of Crédit Mutuel’s leads. “When two such issuers go head to head, there’s always the question if there will be enough room, but we proved that there was – and Crédit Mutuel was even able to take out slightly more (€2.5bn versus SG’s €2.25bn).”

He said that on a curve-adjusted basis, Crédit Mutuel paid perhaps a couple of basis points more than SG for its short-dated trade, attributing the differential to SG’s lower activity in benchmark covered bond issuance in recent years.

The long-dated French supply comes on top of €1.25bn of 10 year paper from Caisse de Refinancement de l’Habitat on Friday, which was priced at 28bp on the back of some €2.8bn of demand that allowed for tightening from 33bp and an ultimate NIP of around 1bp.

Nordea Mortgage Bank was meanwhile today able to price the tightest €1bn or larger seven year trade of the year, despite progress being slightly slower than on some trades, while the spread was tightened 2bp from initial guidance of the 18bp area to a re-offer of 16bp. The final order book was €1.6bn while the new issue premium was around 2bp.

“The fact they were able to get this much demand despite this being the tightest €1bn seven year of the year is very pleasing,” said another lead banker.

“Covered bonds were probably one of the slower asset classes out of the starting blocks at the beginning of the year,” he added, “but they are now working as well as any.”

UniCredit (HVB) rounded off today’s supply, following up on a mandate announcement on Friday with a €1.25bn two-and-a-half year public sector Pfandbrief. Pricing was tightened from the minus 2bp area to minus 7bp on the back of over €2bn of demand, with the new issue premium deemed 0bp-1bp.

Compatriot NordLB is set to go down the tried-and-tested short-dated route with a €500m no-grow three year mortgage Pfandbrief, expected tomorrow (Tuesday), while the next trade from the UniCredit group has already been mandated, a long six year green euro benchmark from Bank Austria.