Arkéa kicked off an expected busier week of euro benchmark issuance today (Monday), with an upsized, €750m five year public sector-backed deal, while Bawag-PSK is expected tomorrow in sevens and Portugal’s Novo Banco is marketing its inaugural benchmark covered bond.

Arkéa Public Sector SCF leads Crédit Agricole, Crédit Mutuel Arkéa, DZ, LBBW, Santander and UniCredit opened books this morning with guidance of the mid-swaps plus 40bp area for a €500m-expected February 2029 issue, expected rating Aaa. After around an hour and a half, they reported books above €1.25bn, excluding joint lead manager interest, and after around two-and-a-half hours, they set the size at €750m and the spread at 34bp+/-1bp, will price in range, on the back of books above €2bn, including €105m of JLM interest. The deal was ultimately priced at 33bp with books above €2.2bn, including €125m of JLM interest and pre-reconciliation.

“It was very smooth, very strong execution,” said a syndicate banker at one of the leads. “We’re talking about only 1bp of new issue concession, and while the initial communication was for €500m expected, the book developed very nicely through the morning, which then allowed us to even punch above that and go for €750m.”

The leads put fair value at 32bp, citing comparables including the issuer’s October 2028s at 29.5bp, mid, pre-announcement, and its January 2031s at 37.5bp, while CRH January 2029s were seen at 33.5bp and BPCE SFH February 2029s, issued on 8 February at 36bp, were at 34.5bp.

The SCF issue comes after a €1bn 10 year issue for Arkéa Home Loans SFH on 29 January that was one of a series of long-dated French benchmarks, and the lead banker said the shorter maturity benefited both from relative scarcity and also recent developments in the rate outlook.

“Today is much better, but in the past two weeks the market has reacted to macro numbers coming in on the hawkish side, mainly from the US, like the NFPs,” he said, “which helps something a bit shorter in duration.”

A syndicate banker at another of the leads meanwhile said relative value continues to support demand for French covered bonds.

“As difficult as it is to sell a US commercial real estate-related covered bond, as easy it is to sell a French covered bond,” he added. “When you can offer it at 33bp in five years, it’s not far from Pfandbriefe in longer maturities, so France is probably still better off, even if they are approaching each other now.”

The relatively uncommon use of “expected” language in the size was the least-worst option available, according to the lead banker.

“As an issuer, firstly, you want to ensure you can do a benchmark, i.e. at least €500m,” he said. “Secondly, you want to have a great price. And finally, if there’s a great price on the table, you don’t want to be kept at €500m.”

He added that while “euro benchmark” literally means €500m or greater, it might be understood as €1bn or greater for an issuer such as Arkéa, while €500m-€750m leaves room for negative interpretation should the deal ultimately be sized at €500m.

“It is not playing around with information,” said the lead banker. “It’s more taking execution risk off the table and leaving opportunities for the issuer – and also for investors, since they can always limit their orders subject to size and spread.”

The French public sector-backed deal came the same day as an Austrian public-sector mandate for Bawag PSK was announced, he noted.

“Commercial real estate has been the hot topic and now we’re doing two public sector transactions,” he said. “The reasoning behind that is not that mortgage-backed bonds are under pressure; they planned their issuance beforehand and it just came by accident that they are doing their trades now.

“But it helps not to have any discussion around the cover pool.”

Bawag is expected tomorrow (Tuesday) with a seven year euro benchmark via DZ, Erste, IMI-Intesa Sanpaolo, LBBW and Nordea.

A lead banker put fair value in the high 40s over mid-swaps, with Bawag 3.125% January 2029s at 41bp, mid, 1.75% March 2030s at 42.5bp, 0.1% May 2031s at 47.5bp, and 1.25% August 2032s at 52.5bp. Erste Bank 2.875% January 3031s priced at 50bp on 2 January were seen at 48bp, while its 3.5% November 2029s were at 42bp.

Novo Banco is set to launch its first benchmark covered bond after investor calls today and tomorrow. Barclays (global coordinator and structuring advisor), Crédit Agricole, Deutsche, IMI-Intesa Sanpaolo and LBBW have been mandated for the €500m no-grow three year obrigações cobertas.

The mandate comes after compatriots Banco Santander Totta and then Banco BPI this month sold highly successful €1bn seven year and €500m long six year trades.

“This will hopefully ride the same sort of momentum,” said a syndicate banker at one of Novo Banco’s leads. “Generally, covered bonds from the periphery have been working extremely well.

“Any maturity would have worked and the peers went for something a bit longer,” he added, “but this being an inaugural trade, it was only natural to be slightly more conservative in tenor to make sure that we have a successful trade.”

According to pre-announcement comparables circulated by the leads, BPI’s March 2030s had tightened from 64bp to 60bp, mid, and Santander Totta’s February 2031s from 67bp to 63bp.

Novo Banco’s covered bond programme and outstanding issuance was converted from conditional pass-through to soft bullet format last year, while its covered bonds were upgraded by Moody’s to Aaa in November alongside other Portuguese issuance.

The “good bank” formed out of Banco Espírito Santo (BES) back in 2014, Novo Banco is 75%-owned by US private equity firm Lone Star (via Nani Holdings SGPS, SA), 12% by the Portuguese state, and 13% by the Portuguese resolution fund.