The success of a €1bn five year trade for Nordea Mortgage Bank was welcomed by market participants today (Thursday), with the level of demand and pricing restoring a degree of confidence to the market and raising hopes that further supply could prove feasible next week.

The Nordic issuer hit the market this morning shortly after having today announced its latest results.

“They moved quickly post-numbers,” said the lead banker, “to get ahead of competing supply from the Nordics and elsewhere from issuers coming out of their silent periods.”

Leads BNP Paribas, LBBW, HSBC, Nordea and SG opened books with guidance of the mid-swaps plus 30bp area for the euro benchmark-sized October 2028 Finnish covered bond, expected rating Aaa. After around an hour and 10 minutes, the leads reported books above €1bn, excluding joint lead manager interest, and after around two hours and 45 minutes, they set final terms of €1bn at plus 26bp on the back of orders exceeding €1.5bn, excluding JLMs, with the final book closing above €1.45bn, including JLM interest.

A banker at one of the leads said the five year maturity had been chosen to target the deepest pool of liquidity, as well as differentiating it from several recent shorter dated more esoteric benchmarks. The tenor was also a good fit for the issuer and complemented its earlier 2023 issuance, a €1bn seven year in February and a €1bn three year green covered bond in August.

Lead bankers put the new issue premium at guidance at 9bp-10bp. Pre-announcement comparables circulated by the leads included two Nordea Mortgage Bank euro benchmarks issued this year, 3.5% August 2026s at an i-spread of 7bp and 3% February 2030s at 26bp, while older 0.125% June 2027s and 1% March 2029s were at 17bp and 24.5bp, respectively.

“They started with a sensible NIP and got a good book behind them, enabling them to take the €1bn and achieve a very strong result,” said the lead banker.

Syndicate bankers away from the leads welcomed the deal’s success.

“The tenor is still the sweet spot and more or less the longest you can go these days,” said one. “It was well-timed after their results came out – fairly good results – and with a degree of stability in the market.

“So a good trade considering the market we are in. It wasn’t a super-blow-out, but they didn’t overpay and hence get a €2bn or €3bn book.”

Another said that although the leads put fair value closer to 20bp, it could arguably be seen at 23bp-24bp, meaning that Nordea’s outcome was all the more impressive.

“Then again, Nordea is a name that usually gets a lot of attention, even if they may start a bit tighter than others would need to,” said the syndicate banker. “They also got the size they wanted and only small drops based on the numbers they put out.”

Stadtsparkasse München was also in the market today, with a sub-benchmark Pfandbrief, following a mandate announcement yesterday.

Leads BayernLB, Erste and Helaba opened books with guidance of the 30bp area for the €250m no-grow October 2028 mortgage Pfandbrief, expected rating AA+ (Fitch). After around an hour and a half, the leads reported books above €300m, including €265m of JLM interest, and after around two-and-a-quarter hours, they revised guidance to 28bp+/-1bp, will price in range, on the back of books above €360m. The spread was ultimately set at 27bp on books above €375m, including JLM interest, and the final book was above €325m.

Today’s supply comes after LBBW reopened the German market on Monday with a €500m no-grow three-and-a-half year public sector Pfandbrief and Banca Popolare di Sondrio sold a €500m no-grow five year OBG on Tuesday.

The Italian deal, expected rating AA (Fitch), was priced at mid-swaps plus 81bp on the back of books above €790m, including €75m of JLM interest, following guidance of the 83bp area. Unlike preceding OBG issuance, Banca Popolare di Sondrio’s new issue came inside BTPs, while 48% was placed domestically and 52% outside Italy. The bank said the transaction completed its medium to long term funding plan for 2023.

A syndicate banker said the week’s deals should give issuers that have been monitoring the market greater confidence in approaching investors, even if supply next week will remain subject to developments in the Middle East and macroeconomic news.

“The market is there – you just need to be aware of your own name recognition and/or be pragmatic in recognising the requisite starting level. Many issuers do acknowledge that – also with respect to how things may compare to January, and choose to pre-fund.

“But – somewhat unusually for covered bonds – it depends very much on the day, with nervousness about conditions persisting.”