Nordea achieved a “super-tight” spread to SSAs on a €750m no-grow three year green covered bond on Friday in its first euro benchmark in almost a year, as investors lapped up the short-dated Finnish deal, allowing for pricing flat to fair value and the tightest re-offer spread in over six months.

Nordea Mortgage Bank hit the market in the morning, leads DZ, HSBC, LBBW, Natixis and Nordea opening books with guidance of the mid-swaps plus 25bp area for a €750m no-grow April 2028 green covered bond, expected rating Aaa. After around an hour and 10 minutes, they reported books above €2bn, including €280m of JLM interest, and after around two hours, the spread was set at 18bp on the back of orders above €3.1bn, with the number of accounts peaking above 100. The final book was above €2.3bn.

“We launched it quite early, 7.36am London time, and it just worked from the get-go, with investors piling in,” said a syndicate banker at one of the leads.

He cited the three year tenor as appealing to investors, with demand strongest in short to medium term maturities, and a defensive option in choppy markets. The rarity of the name – Friday’s euro benchmark is the Finnish issuer’s first since a €1bn 10 year in April last year – was a further attraction, as well as the tenor being rare for Nordic issuers, according to the lead banker, who also cited Nordea’s top quality profile and the green format.

“It had everything for investors,” he added.

The momentum in the order book – helped by what another lead banker said was an attractive starting point – allowed for tightening of 7bp and pricing roughly flat to even slightly inside fair value, according to the leads. Among reference points was a €1.25bn three year Commerzbank Pfandbrief, which was priced on 20 February at 22bp and latterly seen at the 18bp level achieved by Nordea.

“There was an argument to suggest even tighter pricing,” said the first lead banker, “but the issuer wanted to be quite inclusive. In terms of investors, we thought this could be basically just a bank treasury and official institution trade, but we had quite a few asset managers in there as well, which probably tells you that they are quite happy to buy short duration when markets are a bit tricky.”

Banks took 50%, funds 30%, central banks and official institutions 13%, and insurance companies and pension funds 7%. Germany, Austria and Switzerland were allocated 44%, the Benelux 21%, the Nordics 21%, southern Europe 7%, France 5%, and the UK and Ireland 2%.

“Not only was this a rip-roaring success in primary,” added the lead banker, “but also in secondary, closing at 15.5bp on the bid side.”

The re-offer spread of 18bp over mid-swaps is the tightest of any euro benchmark covered bond in over six months, since a €750m long three year LBBW trade at plus 14bp in September.

And at a Bund spread of 32.5bp, it is the tightest euro benchmark covered bond against German government bonds since April 2021, according to the lead banker.

“That tells you just how tight it was,” he said, “but it also shows that you can do that, so long as you’re issuing the sort of tenor the market really wants to buy.”

The spread also compares with 12bp and 17bp paid on three year trades in January by KfW and the EU, respectively.