BNP Paribas Fortis sold its first euro benchmark covered bond in five years today (Friday), a €1bn five year that was priced on the back of books above €1bn after 3bp of tightening, with the reception and execution deemed underwhelming and reflective of continued market weakness.

BNP Paribas Fortis’s last euro benchmark was in September 2018, a €500m seven year. The issuer has a €500m covered bond, its debut euro benchmark from 2016, maturing on Tuesday (24 October).

Leads BNP Paribas, BayernLB, BMO, Danske, ING, Lloyds, Scotiabank, SEB and UniCredit opened books this morning with guidance of the mid-swaps plus 35bp area for the euro benchmark-sized October 2028 mortgage Pandbrieven, expected ratings triple-A. After around an hour and 10 minutes, they reported books above €900m, excluding joint lead manager interest, and after around three hours, they set the spread at 32bp on the back of books of €1bn, excluding JLM interest. The size was ultimately set at €1bn on the back of books above €1bn, including €25m of JLM interest.

Syndicate bankers away from the leads were surprised at the deal’s reception and execution.

“It was quite slow, quite unimpressive,” said one. “It’s a very weak sign to the market.

“It’s not missing anything: they started 10bp back from fair value, which I would have expected to be enough to attract interest, and the scarcity value is there, so I would have expected it to do well.”

He said the outcome demonstrated that in spite of some successful new issues in covered bonds this week, the market remains soft. Yesterday (Thursday), Nordea Mortgage bank priced a €1bn five year deal at plus 26bp after tightening 4bp and on the back of close to €1.5bn of demand.

Another syndicate banker suggested BNP Paribas Fortis’s final terms were “a bit too tight and a bit too large”. He saw fair value at around plus 21bp, implying a concession at guidance of as much as 14bp.

“That was not wrong, but to be honest it is Friday and Friday is not the best day,” he said. “When they tightened 3bp they barely had €1bn of orders, and when they set the final terms the broker quotes were 3bp wide of re-offer. If it had been €750m, it would have been the right trade, but not €1bn out of €1bn.

“If you have the opinion that the market is going wider,” he added, “then you take the money and run.”

Belfius sold a €1bn 3.625% five year at the same 32bp re-offer level as BNP Paribas Fortis on Wednesday of last week (11 October), after tightening pricing from the 37bp area on the back of some €1.5bn or orders, with the new issue premium put at around 4bp.

Pre-announcement comparables circulated by BNP Paribas Fortis’s leads included its 0.875% March 2028s, issued in 2018, at an i-spread of 22.5bp, mid, while ING Belgium 3.375% May 2027s and KBC 3.25% May 2028s, both issued this year, were at 20.3bp and 24.6bp, respectively. BNP Paribas Home Loan SFH 3% May 2028s and 3% January 2030s, also issued this year, were at 20.9bp and 27.4bp.