Crédit Agricole reopened 10 year euro benchmark issuance today (Wednesday) with a €1.25bn issue as part of a €2.5bn trade, while a similarly-sized ING dual-trancher helped take supply to €9.75bn in two days, with all but Aareal comfortably executed, partly thanks to attractive new issue pricing.

Crédit Agricole’s and ING’s €2.5bn trades are the largest fixed rate euro benchmark covered bond transactions since a €2.5bn dual-tranche Societe Generale deal in July 2023 (a €3.25bn Toronto-Dominion Bank three-tranche trade in August included a €1.5bn floating rate tranche).

Crédit Agricole Home Loan’s €1.25bn 10 year trade is the first euro benchmark in the maturity since an LBBW €500m 10 year in June 2023, and the longest euro benchmark since a €1bn eight year tranche of TD’s deal in August.

After a mandate announcement yesterday, leads Crédit Agricole (global coordinator), BBVA, DZ, Scotiabank, SEB and Societe Generale opened books this morning with guidance of the mid-swaps plus 55bp area for a euro benchmark-sized January 2034 green issue, alongside a conventional January 2028 euro benchmark at the plus 35bp area.

On the back of combined books above €3.55bn, with demand skewed towards the longer tranche (above €1.65bn and above €1.9bn), each tranche was sized at €1.25bn, with pricing tightened to 30bp and 50bp, respectively.

“It’s clear with the Crédit Agricole that 10 years can go well – they tightened 5bp and paid around 8bp of new issue concession, in line with shorter dated trades,” said a syndicate banker away from the leads. “As long as you leave a concession on the table, you can get transactions done up to 10 years.”

Another banker away from the leads agreed the outcome was encouraging, even if expectations for the long end should not be raised too high.

“Ten years is a maturity around which there were still a few question marks,” said a banker away from the leads, “but I think Crédit Agricole has answered most of them positively.

“However, at current spread levels and with still-elevated new issue concessions, the best balance between duration and spread probably remains seven years if you are price sensitive. Going for 10 years is another 5bp, 7bp or 10bp more – 7bp might be enough, but that’s 40bp-plus something for a German Pfandbrief and that feels wide in a historic context, so issuers may think twice about whether it’s worth going for that for the sake of doing a duration trade.”

Caisse de Refinancement de l’Habitat (CRH) is planning to follow compatriot Crédit Agricole into 10 years, having mandated a dual-tranche trade also including a five year piece. Commerzbank, Crédit Agricole, LBBW, Natixis, Societe Generale and UBS have the mandate.

ING Bank’s €2.5bn dual-tranche issue was the only of today’s trades not to have been pre-announced yesterday, with a lead banker saying that the issuer could thereby retain maximum flexibility.

“With every deal these days you have to start with reasonable initial pricing guidance, and as long as you do so then investors seem to be happy to participate in covered bonds at these levels,” he said. “So we took that into account.

“We looked at the deals priced yesterday and the fact that they were mainly trading around re-offer or a touch tighter gave us some comfort. We knew it would be busy today, but every day in January will probably be busy for covereds.”

Leads Crédit Agricole, Erste, ING, KBC, LBBW, Natixis, Santander and UniCredit opened books for euro benchmark-sized January 2028 and January 2032 tranches with guidance of the plus 30bp and plus 45bp area, respectively, and ultimately priced them at 25bp and 39bp and sized them at €1.25bn apiece on the back of final books above €1.4bn and above €1.7bn.

The lead banker said the deal had gone better than expected, with the base case having been a smaller trade.

“But the demand was there, so they said, why not?” he added. “The issue should perform in any case given the quality of the book.

“The issuer is very happy with the outcome.”

The lead put the new issue premiums at around 5bp-7bp for the shorter tranche and 7bp-9bp for the longer. According to pre-announcement comparables circulated by the leads, ING February 2027s and April 2028s were trading at 15bp and 21bp, mid, respectively, and its December 2031s and February 2033s at 29bp and 33bp.

DZ Hyp’s 7.1 year benchmark today came after compatriots Commerzbank and LBBW, as well as Erste Group Bank, had reopened the market and the seven year part of the curve yesterday (Tuesday). A lead banker said hitting the market today offered a good balance between still being at the forefront of supply, but with there being less risk than when reopening the market.

Leads Danke, DZ, Helaba, ING, Natixis and UBS opened books this morning with guidance of the 37bp area for a February 2031 euro benchmark-sized mortgage Pfandbrief. After close to an hour and a half, they reported books above €1.1bn, including €95m of joint lead manager interest, and after around two and three-quarter hours, the size was set at €750m and guidance revised to 34bp+/-1bp, WPIR, on the back of books above €1.25bn. The deal was ultimately priced at 33bp, with the book good at re-offer above €1.14bn.

The pricing compared with 30bp for LBBW’s March 2031 issue yesterday and 38bp for Commerzbank’s January 2031, and the lead banker said the relative positioning of DZ Hyp at 33bp made sense based on secondaries and was a level the issuer could be comfortable with.

“It is definitely one or two basis points wider than what might have been hoped for at the end of last year,” he added, “but looking at the pipeline and the levels we have seen so far, it’s the best outcome that could have been achieved.”

He put the new issue premium at 9bp, after LBBW and Commerzbank were deemed to have paid around 8bp and 9bp, respectively.

NordLB is set to launch the fourth seven year German Pfandbrief of the week tomorrow, having mandated Crédit Agricole, Deutsche, DZ, Helaba, NordLB and RBC as joint leads for a €500m no-grow green mortgage Pfandbrief.

UniCredit Bank Austria also added green supply today, pricing a €750m November 2028 mortgage covered bond at 47bp over on the back of a final book above €2.45bn, including €155m of JLM interest. Leads ABN Amro, BayernLB, Erste, JP Morgan, Natixis, RBI, TD and UniCredit tightened pricing from initial guidance of the 55bp area and then revised guidance of 50bp+/-3bp, WPIR.

Although the primary market is expected to remain busy, a syndicate banker said one or the other issuer is holding off from issuing in light of the new issue premiums and absolute spreads being paid, hopeful that a less crowded market in the coming weeks could see concessions fall.

“And you have to have a pretty negative outlook to think that things might turn worse in the next four weeks,” he said. “The only fear could be that investors run out of cash or conviction that the next trade will still be a good investment.

“Doing something right now with 8bp-9bp of new issue concession may mean you’re probably paying the same spread as in two or three weeks from now, when the concession could be 5bp but to a secondary level that is 4bp-5bp wider.”

The exception to the successful new year’s issuance was a €500m long four year mortgage Pfandbrief for Aareal Bank that, including €125m of joint lead manager interest, was barely subscribed and priced at 52bp – the middle of guidance and offering a new issue premium of some 17bp, according to one lead. The deal was announced as a euro benchmark yesterday, with Commerzbank, Deutsche, Natixis, NatWest, NordLB and UBS as leads.

The new issue was seen as a fresh test of sentiment towards commercial real estate-oriented names, but suffered a similar outcome to a Deutsche Pfandbriefbank €500m long four year deal in September.

Syndicate bankers away from the leads said today’s execution was “painful”, in the words of one.

“I thought we were past those bad experiences,” he added.

Another said the transaction had proved as difficult as feared.

“The commercial real estate story is putting a lot of pressure on the specialised mortgage banks out of Germany – more so than the universal banks – even already last year,” he said. “And now we have a trade that isn’t the end of the world, but it demonstrates what the challenges are for those types of issuers.”