Bawag-PSK encountered some price sensitivity on a seven year public sector benchmark today (Tuesday), but was able to take out €750m on the back of some €1.2bn of demand at a NIP of around 3bp, with a sub-benchmark for compatriot Hypo Tirol due to follow tomorrow and Novo Banco finishing marketing.

After Bawag’s mandate was announced yesterday (Monday), leads DZ, Erste, IMI Intesa Sanpaolo, LBBW and Nordea this morning went out with guidance of the mid-swaps plus 58bp area for a euro benchmark-sized February 2031 public sector Pfandbrief, expected rating Aaa. After less than an hour, they reported books above €1bn, excluding joint lead manager interest, and after around two-and-a-quarter hours, guidance was tightened to 53bp+/-1bp on the back of books above €1.7bn. The spread was ultimately set at 52bp and the size at €750m with more than €1.3bn of orders, excluding JLM interest, and the final book was some €1.2bn.

The new issue is the second euro benchmark of the week, after a €750m five year for Arkéa Public Sector SCF that attracted over €2.2bn of orders and was priced with a new issue premium of 1bp yesterday. A syndicate banker at one of the leads said the less exuberant outcome today was to be expected.

“Having more price sensitivity for an Austrian covered than on a French was not a big surprise to us,” he said. “Although Austrian public sector covered bonds are rare, there has already been quite a lot of supply out of Austria and some of the trades earlier in the year had to fight significantly more than this one.

“The move from 53bp+/-1bp to 52bp was a price break for a couple of hundred,” he added, “but we had €1.3bn excluding JLMs in the end, so very solid. And also the number of accounts was impressive.”

Eighty-four accounts were allocated bonds, Germany taking 46%, the Nordics 17%, France 11%, Austria 9%, the Benelux 7%, Italy 4%, Asia 3%, and others 3%. Banks took 46%, asset managers and fund managers 33%, insurance companies and pension funds 11%, and central banks and official institutions 10%.

The leads put fair value at 49bp, implying a new issue premium of 3bp. According to pre-announcement comparables circulated by the leads, Bawag 3.125% January 2029s were at 41bp, mid, its 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, and its 3.5% November 2029s at 42bp.

Bawag at the beginning of the month announced the acquisition of Dutch covered bond issuer Aegon.

Hypo Tirol is expected to offer further Austrian supply tomorrow (Wednesday), following the announcement of a planned €250m five year public sector Pfandbrief today. Erste, LBBW, NordLB and RBI are leads.

The bank’s last sub-benchmark was a €300m five year green mortgage Pfandbrief in January 2023.

Hamburger Sparkasse is set to issue a €500m no-grow seven year mortgage Pfandbrief tomorrow (see separate article), while Novo Banco could launch its debut benchmark covered bond, following the Portuguese deal’s announcement yesterday and investor calls.