SR-Boligkreditt sold the first Norwegian euro benchmark of the year yesterday (Monday), a €500m eight year that had a more modest reception than much recent supply, with the distractions of Karneval and German commercial real estate lenders cited as possible drags on its execution.

SR-Boligkreditt leads Commerzbank, DekaBank, JP Morgan, Santander and TD opened books with guidance of the mid-swaps plus 48bp area for a euro benchmark-sized February 2032 Norwegian covered bond, expected rating Aaa. They ultimately sized the deal at the minimum €500m (NOK5.7bn) and priced it at 44bp with a final book above €1bn.

Syndicate bankers at and away from the leads had not expected Karneval celebrations to interfere with any new issues executed early this week, as they might have done in the past, but after the lower oversubscription and tightening than on recent new issues, they suggested the timing could have been a factor.

“In today’s world, every desk should be staffed enough to make decisions, and I would have expected that if you normally buy it on a Monday or a Tuesday, you buy it on Karneval,” said a syndicate banker at one of the leads, “but looking at how things have gone, it could well have been a factor – you also have Lunar New Year celebrations.

“From the chats I saw, clients were meanwhile concerned about pbb and Aareal – their exposure, how liquid the bonds are, if they had widened. There was more noise about that, I feel, than about new deals.”

Some market participants also considered the 48bp starting point for SR-Boligkreditt’s eight year on the ambitious side – the leads put fair value at around 42bp-43bp and tightening of around 7bp has not been uncommon amid recent supply.

The lead banker said the picture was also complicated by an old low coupon and shorter-dated, 0.01% March 2031 issue of SR-Boligkreditt being quoted in the context of mid-swaps plus 45bp-46bp, but closer to 40bp when translated into asset swap terms. Although this was left out of pre-announcement comparables circulated by the leads, he acknowledged that it may have contributed to deterring accounts already questioning whether or not to participate.

However, he noted that the deal was twice-subscribed, tightened 4bp and paid a new issue premium of only 1bp-2bp – all outcomes that in most times would rightfully be considered a solid success.

“The deal was fairly priced,” he added. “We could have done a slightly larger size, but the issuer chose to do €500m rather than €750m, and so the quality of the accounts that were allocated was top quality.”

The new issue is SR-Boligkreditt’s first euro benchmark covered bond since a €1bn long five year issue in August 2022. The last Norwegian euro benchmark was a €500m five year for Sparebanken Vest Boligkreditt on 8 November.

The euro benchmark primary market was today, although market participants said the situation around Aareal Bank and particularly Deutsche Pfandbriefbank (pbb) had calmed down.

“Last Monday, Tuesday, Wednesday people were getting really nervous and there was more selling than buying,” said a trader. “Since Thursday, in combination with pbb’s announcement – although I’ve heard different opinions on how wise that was – we have seen more buying than selling, with sophisticated investors coming in and buying in size.”

Photo: SpareBank 1 SR-Bank, Stavanger; Credit: Jan Inge Haga/SpareBank 1 SR-Bank