Hypo Noe Landesbank für Niederösterreich und Wien generated one of its biggest ever order books for a €500m no-grow long five year covered bond today (Tuesday), with a dearth of covered bond supply and especially Austrian paper cited as contributing to some €2.3bn of orders and zero NIP.

Following a mandate announcement yesterday (Monday), leads Danske, Erste, Helaba, LBBW, RBI and UniCredit opened books this morning with guidance of the mid-swaps plus 38bp area for the €500m no-grow January 2031 mortgage Pfandbrief, expected rating Aa1.

After around an hour, they reported books above €1.5bn, including €300m of joint lead manager interest, and after a little over two hours, the spread was set at 32bp on the back of books above €2.35bn, pre-reconciliation. The final book was above €2.28bn, including the €300m of JLM interest.

The book is one of the largest Hypo Noe has enjoyed and a lead banker described the outcome as “fantastic”, with several factors playing into its success.

“It’s been fairly slow in general in the primary market, but also in covered bonds,” she said, “and investors are still quite eager to get bonds into their books. And the tenor is still the sweet-spot.

“Additionally, there has been very limited Austrian supply, and investors are happy to get a Pfandbrief, and an Austrian Pfandbrief that offers a pick-up to Germany.”

A syndicate banker away from the leads picked up on the attractions of Austrian paper.

“Austria was one of the regions that previously issued a lot – there was over €15bn of Austrian supply in 2022 and 2023, but then €8bn last year and only €4bn this year – and that plays in their favour,” he said. “It was also one of the regions that was trading wide, but even now the level is quite fair – they’re in the same ballpark as Australian, UK or Canadian names, but enjoy better regulatory treatment.”

The last euro benchmark covered bond from the jurisdiction was a €500m four-and-a-half year for Raiffeisen-Landesbank Steiermark, also at 32bp, on 30 September, with Hypo Noe itself having been the last previous Austrian before that in a €500m long seven year public sector Pfandbrief on 27 May at 49bp.

RLB Steiermark’s issue was quoted at 31bp, among pre-announcement comparables circulated by the leads, while Erste Bank April 2032s issued in January were seen at 32bp.

The leads put fair value in the low 30s, with the lead banker saying the pricing was ultimately either flat to fair value or slightly inside, with a spread of 31bp also having been theoretically possible, but the issuer choosing to take a strategic approach.

“What we noticed in today’s transaction was a bit more fast money accounts playing again,” she added, “and also increasing their orders. More or less the entire quality covered bond investor base is playing as well – the bank treasuries, asset managers, central banks, official institutions and so on – but it seems the trading accounts want to get a bit more covered bonds into their books, too, which is helpful for momentum and was the combination we saw today.”

Photo © Hypo Noe/Philipp Monihart