The euro benchmark covered bond market proved surprisingly receptive to new issues this week, buoyed by broader improvements in fixed income sentiment, with a €1.25bn five year green debut from Rabobank proving the pick of a handful of deals dominated by ESG themes.

Caffil, Deutsche Bank SAE Unipersonal and Münchener Hypothekenbank also hit the market, with the four successful new issues totalling €2.75bn and taking November supply to €8.75bn, and year-to-date supply above €183bn.

The positive outcomes enjoyed by the four issuers built on constructive activity last week, when Nordic issuers in particular enjoyed strong results. Market participants attributed the better tone encountered by this week’s supply to the further improved macroeconomic backdrop.

“The latest economic data from the USA, which makes further interest rate hikes by the Fed appear unlikely and has even fuelled fantasies of interest rate cuts, has also recently led to greater optimism on the European markets,” said DZ analyst Jörg Homey.

On Wednesday, Rabobank priced its €1.25bn five year green debut, expected ratings triple-A, at 20bp over mid-swaps, a full 6bp inside guidance of the 26bp area, on the back of some €2.2bn of demand, with market participants putting the new issue premium at anything from 2bp to 4bp.

A syndicate banker away from the leads said that the pricing looked aggressive, but that the outcome showed several factors to have played in the Dutch bank’s favour. These included relatively limited supply from the Netherlands this year, with the longer maturities they tend to prefer having been less available, and the five year deal offering rare exposure to Rabobank covered bonds in a shorter maturity – the five year issue is its shortest ever euro benchmark.

“Then you have Rabobank being a national champion,” added the banker, “so with this being both green and in the mid-point in the curve, they could get something on the tight side. It’s comparable to what we have seen with national champions like Nordea, which have come with relatively tight prints versus secondaries – it seems investors will always find room to buy these names, regardless of the last couple of basis points.”

Another syndicate banker said the lack of price sensitivity among investors – also suggested by other trades this week and last – was a reflection of the improved tone of the market.

“There was a period of lacklustreness in covereds,” he said, “but post the US numbers and the rally we have seen in rates, it appears as if investors still have money that can be spent and that they are feeling a high degree of comfort that now is a good time to put that to work again given that the rates picture is a bit more benign.

“But they mostly want to put their money to work in names where there are no questions asked, the names they will not get fired for.”

MünchenerHyp, also on Wednesday, priced its €500m no-grow five year green mortgage Pfandbrief, expected rating Aaa, at plus 19bp, 5bp inside guidance, on the back of some €1.54bn of orders, with the new issue premium put at around 5bp-6bp.

A lead banker said the outcome had surpassed expectations.

“The order book was larger than and had more price dynamics than expected,” he said. “We were sure that we could tighten maybe 3bp, but with the order book of €1.5bn, it was no problem to tighten 5bp, and the order book grew after we fixed it at that level.

“That is a very encouraging sign.”

The two green issues came after Caffil on Monday sold a €500m long five year social covered bond at a new issue premium of just 3bp, on the back of some €1.34bn of orders, and the issuer said the ESG format had contributed to the strong outcome.

According to LBBW senior investment analyst Rodger Rinke, sustainable covered bond issuance, boosted by the recent series of ESG format deals, has reached €21.35bn year-to-date, 12% more than in 2022 when overall volumes were higher.

Deutsche Bank SAE Unipersonal on Tuesday priced its €500m three year cédulas at plus 40bp, on the back of some €900m of demand, following initial guidance of the plus 45bp area followed by revised guidance of 40bp-42bp, will price in range. The deal is the first euro benchmark from the German group’s Spanish arm since January 2019 and the first cédulas benchmark since the first two months of 2023, when €7.75bn of Spanish issuance hit the market.

The new issue came just over a week after Deutsche Bank itself issued a €500m March 2029 mortgage Pfandbrief at mid-swaps plus 26bp. Market participants offered varied perspectives on the cédulas outcome, with some having expected stronger demand given the pick-up of some 30bp over the recent Pfandbrief – with investors happy for the extra spread in their global allocation towards Deutsche – but others surprised that the differential between Germany and Spain was not wider.