Commerzbank, Erste and LBBW successfully pushed out to seven years on the first business day of 2024, with €2.75bn of supply in that part of the curve, and Crédit Agricole is set to test 10s tomorrow, suggesting the much anticipated reopening of the long end is finally happening.

Today’s supply is the longest in euro benchmarks since Toronto-Dominion sold a €1bn eight year on 29 August.

All three of today’s issuers had put down markers for 2 January by pre-announcing their plans, Landesbank Baden-Württemberg (LBBW) having done so before Christmas, on 19 December, Commerzbank the next day, and Erste on 28 December. Bankers involved in the deals said expectations among syndicates that the first business day of the year – and indeed the unusually long first business week – would be even busier than usual contributed to the early announcements, while making it clear to investors that covered bonds would be open for business if they were in any doubt. They noted that the issuers are all well known and among those who might also pre-announce deals ahead of a weekend without opening themselves up to too much risk.

The targeted maturities also played a part in the early announcements.

“It alerted investors towards the fact that longer maturities are, at least from an issuer perspective, finally back on the table,” said one syndicate banker, “and that the first moves to get a good deal done would be made.

“And investors had been fairly vocal that they would like to see longer tenors already, particularly after the central banks signalled fairly clearly that we have now seen the peak in rates.”

Syndicate bankers on the three trades acknowledged that the presence of the three issuers in the market in the same part of the curve and at the same time had an impact on pricing thoughts.

“We had to fine tune the relative value as the three transactions were kind of similar,” said one, “if not exactly competing: on the one hand LBBW was going for limited size and rather working on price; while on the other Commerzbank with a dual-tranche was going for size; and then Erste as the widest name, playing it safe with a rather generous starting point and then a fairly strong tightening afterwards.

“So three different approaches with slightly different objectives.”

LBBW hit screens first, leads Erste, IMI-Intesa Sanpaolo, LBBW, Natixis, Swedbank, TD and UBS going out with guidance of the mid-swaps plus 35bp area for a euro benchmark-sized March 2031 mortgage Pfandbrief. After around an hour and 20 minutes, they reported books above €1bn, excluding joint lead manager interest, and a €750m deal was priced at 30bp on the back of books above €1.3bn, including €60m of JLM interest, with the final book above €1.25bn.

A lead banker put the new issue premium at around 8bp, with fair value around 22bp – LBBW 0.125% July 2029s were at 18bp and 3.25% June 2033s at 26bp, according to pre-announcement comparables circulated by the leads.

Commerzbank leads ABN Amro, BBVA, Commerzbank, Crédit Agricole, Danske, Helaba, SEB and UniCredit priced its seven year (January 2031) part of its dual-tranche transaction 8bp wider than LBBW’s, at 38bp, for a size of €1bn on the back of books above €1.35bn, excluding €135m of JLM interest, and following guidance of the 42bp area. A €1bn three year was printed at 23bp on the back of more than €1.55bn of demand and following guidance of the 27bp area.

The new issue premiums were put at around 9bp for both tranches by a syndicate banker at one of the leads, who said the starting points were slightly wider than had originally been planned, with LBBW’s having been higher than they had anticipated.

“That pushed the starting level a bit wider here as well,” said the banker, “and Erste continued this trend.”

Erste Group Bank leads BayernLB, Commerzbank, Crédit Agricole, Erste, LBBW, TD and UniCredit opened books with guidance of the 57bp area for the euro benchmark-sized January 2031 mortgage Pfandbrief. After around two-and-a-half hours, they revised guidance to 52bp+/-2bp, will price in range, and set the size at €1bn on the back of books above €1.75bn, including €40m of JLM interest. The deal was ultimately priced at 50bp on the back of books above €2bn.

“It was probably a more granular book than with the German names,” said a lead banker. “So while the starting point might have looked a bit high, the wider spread name attracted investors, as was the case for most of the second half or last year, whereas for Pfandbrief demand is there, but it’s not unlimited.”

Another banker involved in today’s supply said all three issuers played it somewhat safe in their approaches.

“We don’t have a crystal ball so it’s all about gauging the new issue concession required, so I think this morning everyone just added a few bips to the pre-Christmas thoughts,” he said, “and that is indeed what investors are expecting. And if you’re not willing to take a pragmatic approach and do that, you’ll probably end up with a transaction that isn’t very good and not getting the size you want or whatever.

“Supply expectations are high, especially for the first quarter, so investors know that if they don’t buy today, they can buy tomorrow or the next day.”

Crédit Agricole Home Loan SFH is set to go even longer tomorrow (Wednesday) with the first 10 year euro benchmark since June as part of a dual-tranche trade also including a four year. BBVA, Crédit Agricole, DZ, Scotiabank, SEB and Societe Generale have the mandate.

“The wider spread jurisdictions but within core Europe clearly have value at the moment and Crédit Agricole is certainly part of that group,” said a banker away from the leads, “they made the 10 year a green bond, which is certainly a smart tactical choice, and being part of a dual-tranche with the conventional four year, they have the flexibility to make it €500m up to €1bn. Either way you look at it, it should be a good trade.

“And if it succeeds, I would expect others to follow, not numerous issuers, but certainly a couple from those jurisdictions that structurally need duration, so that could be French, potentially Dutch, or even someone from Spain.”

Also awaited with interest is a long four year mortgage Pfandbrief for Aareal Bank, mandated to Commerzbank, Deutsche, Natixis, NatWest, NordLB and UBS. With its commercial real estate exposure, the lender was being discussed as “a different animal” to the other German supply this week, with one noting that the issuer had opted for a more defensive maturity.

However, he said it would to an extent be going up against a five year green euro benchmark for UniCredit Bank Austria, which is expected via ABN Amro, BayernLB, Erste, JP Morgan, Natixis, RBI, TD and UniCredit.

DZ Hyp is the forth officially mandated issuer expected tomorrow, with the German targeting a similar maturity to its compatriots today in a 7.1 year euro benchmark mortgage Pfandbrief via Danske, DZ, Helaba, ING, Natixis and UBS.

At least one more issuer could emerge tomorrow, according to syndicate bankers, with more shorter dated supply also expected this week.