DNB issued the tightest seven year euro benchmark of 2024 today (Wednesday), but the barely covered €1bn trade suggested spread limits for low beta names are being reached, even if Danske succeeded with a seven year as part of a dual-trancher, while Iccrea scored a higher beta hit in 10s.

DNB Boligkreditt entered the market this morning via Barclays, BBVA, Crédit Agricole, DNB, ING, NatWest and NordLB, with initial guidance of the mid-swaps plus 31bp area for a euro benchmark-sized June 2031 issue, expected ratings Aaa/AAA (Moody’s/S&P). After around two hours and 10 minutes, the leads reported books above €1.5bn, including €275m of JLM interest, then after close to three hours, the size and spread were set at €1bn and 25bp on the back of books above €1.5bn. The final order book was €1.1bn, including €175m of JLM interest.

“This was a bit of a surprise to the downside,” said a syndicate banker away from the leads. “We have not experienced something like this for some, the market as a whole and in particular DNB, which usually provides us with great transactions, large books, large deals, etc.

“The pricing was punchy, but still…”

A syndicate banker at one of the leads acknowledged that there had been significant book attrition at the re-offer spread.

“The moral here is that we can now see quite a lot of selectivity from investors, especially when it comes to these low beta type of names,” he said. “We have seen an almost uninterrupted rally since autumn with just some volatility here and there, and it doesn’t feel as if the market is going any tighter than this – I don’t expect we’ll beat this kind of level anytime soon.

“There is less investor liquidity,” he added, “especially for names like DNB where levels are as compressed as we can see today – they are much more willing to look at something exotic, as we saw on Iccrea.”

Another syndicate banker away from the leads said this was particularly the case at the longer end, where there was more investor selling in the secondary market, particularly from “tourists” who had opportunistically bought into the asset class. And he said that if low beta issuers are looking for size, they need to pay a couple of basis points more today, something the lead banker echoed.

According to pre-announcement comparables circulated by the leads, DNB March 2029s were quoted at 20bp, mid, with Rabobank February 2034s at 27bp and Nordea Mortgage Bank January 2031s at 25bp, and he put fair value at around 24bp, implying a new issue premium of 1bp.

“CFF paid maybe 3bp of new issue premium on Tuesday,” added the lead banker, “and that got done relatively easily for a big size.”

Danske Bank announced the mandate for its dual-tranche, three year floating and seven year fixed rate issuance, expected ratings AAA/AAA (S&P/Fitch) yesterday, mandating DZ, Erste, Natixis, Santander and UBS alongside itself.

The euro benchmark is the first from the Danish entity since 2017 and the first ever from the issuer’s “D” pool. This includes solely Danish residential mortgages and has only previously been used for Danish krone issuance and private placements – other Danske issuance has been backed by cover pools of international mortgages and a mix of residential and commercial mortgages. The euro benchmark is also understood to be the first from Denmark to feature solely residential mortgages, with Jyske and Nykredit issuance having included some a mix including commercial mortgages.

“This is the purest of the pure,” said a lead banker. “And arguably Denmark is the most solid of the Nordics these days, in terms of the economy and mortgage market.”

The leads opened books this morning with guidance of the three month Euribor plus 32bp area for the June 2027 FRN and mid-swaps plus 35bp area for the June 2031 fixed rate benchmark. After around an hour, they reported combined books above €2bn, including €410m of JLM interest. Then after around two hours and 50 minutes, with combined books above €2.8bn (of which €410m was JLM interest), the spread for the three year was set at 18bp on the back of books above €1.15bn (€235m of JLM interest), and for the seven year at 27bp on the back of books above €1.65bn (€175m), with the combined issue size given as €1bn-€1.25bn. The combined book at re-offer was €2.25bn, and the three year tranche was sized at €500m on the back of orders above €950m, and the seven year at €750m on the back of books above €1.3bn, JLM interest unchanged.

“We achieved exactly the result we were hoping for,” said the lead banker.

He said the now common fixed and floating pairing had achieved the desired outcome of offering both attractive size and price, with the seven year result particularly pleasing in the context of DNB’s issuance and having been helped by the premarketing yesterday.

According to pre-announcement comparables circulated by the leads yesterday, Nordea January 2027s were at a discount margin of 11bp, mid, Nationwide May 2027s at 15bp, and Santander UK May 2027s at 17bp. LF Hypotek May 2030s were at 25.5bp, mid, Nordea January 2031s at 24.5bp, and Jyske April 2031s at 27.5bp. The lead banker put fair value for the seven year in the context of the 27bp area, taking into account the historic pick-up paid by Danske, even if this was being eroded.

After a mandate announcement yesterday, Iccrea Banca leads Barclays, Crédit Agricole, DZ, Santander and UniCredit opened books this morning with guidance of the mid-swaps plus 78bp area for the €500m-expected June 2034 OBG, expected rating Aa3. After around an hour and 20 minutes, they reported books above €1.5bn, including €180m of JLM interest, then after around two-and-a-half hours, the spread was set at 68bp on the back of books above €2bn, including €200m of JLM interest, with a size of €500m still expected. After around three hours and 10 minutes, the deal was ultimately sized at €750m on the back of books above €1.85bn, pre-reconciliation and including €200m of JLM interest. The final book was above €1.45bn.

“The pricing inside 70bp was something that they were definitely targeting,” said a syndicate banker at one of the leads, “and luckily we were able to safeguard most of the book after fixing at 68bp, so we could go for both price and size, being in a position to do €750m.”

He put fair value in the context of the high 60s, based on a varied mix of comparables.

“We didn’t officially go out with a number,” add the lead banker, “but the re-offer was close to, if not slightly through fair value.”

After the announcement of a €500m no-grow three year debut covered bond on Friday and investor calls on Monday and yesterday, Maybank Singapore joint leads BNP Paribas, DBS, Deutsche, Helaba, HSBC and Maybank Securities opened books with guidance of the mid-swaps plus 32bp area for the June 2027 new issue, expected ratings Aaa/AAA (Moody’s/S&P). After around an hour and 10 minutes, they reported books above €1.1bn, including €250m of JLM interest, then after around two-and-a-half hours, guidance was revised to 26bp+/-1bp, will price in range, on the back of books above €1.4bn. After around three-and-a-half hours, the spread was ultimately set at 25bp, on the back of books above €1.37bn, including €150m of JLM interest, and the final book good at re-offer was €1.25bn.

Maybank’s programme was established two months ago, with Standard Chartered Singapore subsequently doing likewise and then launching its debut on Tuesday of last week (21 May), a €500m three year covered bond priced at mid-swaps plus 22bp.