A €500m three year Novo Banco debut benchmark covered bond yesterday (Wednesday) was almost 10 times oversubscribed, allowing for pricing flat to fair value, while Crédit Agricole came inside its curve with a short seven year. TSB meanwhile mandated a debut euro benchmark.

After a mandate announcement on Monday and marketing through Tuesday, Novo Banco leads Barclays, Crédit Agricole, Deutsche, IMI-Intesa Sanpaolo and LBBW yesterday morning opened books with guidance of the mid-swaps plus 55bp area for the €500m no-grow February 2027 obrigações cobertas, expected rating Aaa. After around an hour, they reported books above €2bn, excluding joint lead manager interest, and after around an hour and 50 minutes, the spread was set at 45bp on the back of books above €4bn, excluding JLM interest. The book ultimately reached some €4.9bn.

As well as being nearly 10 times oversubscribed, the deal was priced roughly flat to where the leads saw fair value.

“It was a very strong trade, throughout the whole process,” said a syndicate banker at one of the leads. “We had very good IoIs and built on that. We then had the luxury of being as aggressive as we would like to have been, pretty much matching the biggest moves we’ve seen from issuers this year.

“It just highlights, again, that investors are very keen to put money to work, but also to look at names they maybe haven’t looked at in depth before, more infrequent or even inaugural issuers.”

Announcing the mandate on Monday, the leads circulated pre-announcement levels for the two new Portuguese issues thus far this year, BPI March 2030s, which had tightened from 64bp to 60bp, mid, and Banco Santander Totta February 2031s, which had tightened from 67bp to 63bp.

However, the lead banker said that for Novo Banco’s three year, market participants had considered the shorter part of the two other banks’ curves, among ways of calculating fair value.

“As a floor, there are the Banco Santander Totta September 2026s trading in the low 40s, and obviously you need a bit of delta versus that, but not much, especially because it is such a short part of the curve,” he said. “And then if you look at Banco BPI, their two most recent bonds give you fair value for a new BPI five year of plus 55bp, and then the curve between three and five years is about 15bp for the Portuguese, which would put fair value at around 40bp, low 40s.

“Then applying a small premium on top of that because this is an inaugural issue would point to 45bp as fair value.”

Crédit Agricole Home Loan SFH leads Commerzbank, Crédit Agricole, Danske, Helaba, ING, La Banque Postale and TD opened books with initial price thoughts of the mid-swaps plus 47bp area for the euro benchmark-sized December 2030 obligations de financement de l’habitat, expected ratings Aaa/AAA/AAA (Moody’s/S&P/Fitch). After around an hour, they reported books above €1.75bn, and after around an hour and 50 minutes, the spread was set at 39bp for an expected size of €1.25bn on the back of books above €3bn. After around two hours and 20 minutes, the leads set the size at €1.5bn on the back of books above €2.9bn, including €35m of JLM interest and pre-reconciliation, and the final book was above €2.7bn, including the JLM interest.

The short seven year euro benchmark follows a €2.5bn dual-tranche deal for the issuer on 3 January that was split into €1.25bn green 10 and €1.25bn four year tranches.

“We have seen some very good trades from Belgium and Jyske in the seven year tenor,” said a syndicate banker at one of the leads, “and we thought the issuer could extract a lot from that part of the curve. That proved to be exactly right.

“Seven years is probably where you have the deepest liquidity at the moment in covered bonds,” he added. “It’s a tenor that works a lot for the bank treasuries for whom 10 years is a bit too long, and similarly for the central bank, official institutions, and you still have the asset managers.”

According to pre-announcement comparables circulated by the leads, the issuer’s January 2030s were at 36bp, mid, its May 2030s at 38bp, October 2030s at 41bp, and January 2034s at 43bp. They also quoted Belfius, Crédit Mutuel, ING Belgium and Jyske deals in the seven year part of the curve issued this year, all at around 37bp over. The lead banker said that based on the issuer’s curve, fair value was around 41.5bp, and based on the rest of the market, around 39bp, so they deemed fair value to be around 40bp.

“The Crédit Agricole curve was probably quoted a little bit too wide and we felt that we could reprice it a little with such a trade,” he added. “We started a little on the cautious side, given where the outstandings were, but when we had the €3bn book with amazing quality, we could clearly punch through fair value, and the book barely dropped.

“We finished at €2.7bn, so very sound, and we could take €1.5bn while pricing through fair value.”

Following a mandate announcement on Tuesday, Hamburger Sparkasse (Haspa) leads Commerzbank, Danske, DekaBank, LBBW and UniCredit opened books with guidance of the mid-swaps plus 38bp area for the €500m no-grow February 2031 mortgage Pfandbrief, expected rating Aaa. After around an hour and 35 minutes, they reported books above €700m, including €160m of JLM interest, and after around two-and-a-half hours, the spread was set at 34bp on the back of books above €820m, including the €160m of JLM interest. The final book was around €800m.

The deal is the first German Pfandbrief in two weeks, against a backdrop of sharp widening in CRE-focused issuers’ spreads. A lead banker said the issuer’s plans took this into account as well as the otherwise supportive market backdrop for covered bonds.

A syndicate banker away from the leads noted that although the oversubscription level was only modest, the issuer had only once previously achieved a book above €1bn on a benchmark.

“Not a bad trade,” he said. “And it’s nothing I’d interpret as a bad sign for Pfandbriefe.”

According to pre-announcement comparables circulated by the leads, Haspa February 2028s and September 2028s had been trading at 20bp and 21bp, mid, respectively, with the latter being the issuer’s previously longest outstanding benchmark. The lead banker said the re-offer level was in line with those of more frequent German issuers, while a banker away from the leads put the new issue premium at around 3bp, with perhaps 1bp of that reflecting sentiment towards Pfandbriefe.

The 34bp spread is the same as paid by LBBW on a €500m 10 year on 7 February, which was the last prior German Pfandbrief benchmark.

Hypo Tirol meanwhile sold a €250m five year sub-benchmark yesterday. Leads Erste, LBBW, NordLB and RBI priced the Austrian public sector Pfandbrief at 54bp following guidance of the 60bp area and on the back of a book above €540m.

TSB Bank is planning an inaugural euro benchmark covered bond, with the announcement yesterday of a €500m no-grow five year debut to be launched after marketing scheduled until tomorrow (Friday). ABN Amro, Banco de Sabadell, BMO, LBBW and Lloyds have been mandate for the Sabadell-owned UK issuer.

Pre-announcement comparables circulated by the leads included Nationwide 3.625% March 2028s at 33bp, mid, Coventry Building Society 0.01% July 2028s at 45bp, Clydesdale Bank (Virgin Money) 3.75% August 2028s and Yorkshire Building Society 0.01% November 2028s at 51bp, and Nationwide November 2028s at 39bp.

The latter, a €1bn five year trade in November, was the last UK euro benchmark covered bond.

A syndicate banker said supply next week should be higher than this, with a few deals in the pipeline and market conditions still constructive.