ABN Amro and Mediobanca took advantage of a turnaround in market sentiment at the start of this week to hit the primary market today (Tuesday) with €1.5bn and €750m three year covered bonds, respectively, boding well for further supply, including outstanding Canadian mandates.

Following sentiment at the end of last week verging on the “apocalyptic”, in the words of one syndicate banker involved in today’s issuance, conditions improved significantly yesterday (Monday). Euro FIG supply remained confined to only a €250m six year mortgage Pfandbrief for Evangelische Bank, but issuers monitoring the market spotted a potential window of opportunity and the Dutch and Italian deals hit screens this morning.

“It again shows how quickly the tide can turn,” said the syndicate banker. “A lukewarm day like yesterday is apparently enough to make people reconsider their stance and jump on the next ship that comes along.”

Bankers involved in today’s trades said the new issues surprised to the upside.

“We had been monitoring the market for one or two sessions, wondering whether it could make sense,” said another syndicate banker, “and after a stable day yesterday, given how we opened, it was a good day, and it ended up with an even stronger tone than we had expected.”

ABN Amro was first out of the blocks. Leads ABN Amro, BNP Paribas, Crédit Agricole, Deutsche, DZ and NordLB opened books at around 09.00 CET with guidance of the mid-swaps plus 18bp area for a euro benchmark-sized October 2029 Dutch legislative covered bond, expected ratings Aaa/AAA (Moody’s/Fitch). After around an hour and 20 minutes, they reported books above €1.5bn, excluding joint lead manager interest, and after around two hours and 40 minutes, they set the spread at 14bp and the size at €1.5bn on the back of orders above €2.05bn, excluding JLMs. The final order book was above €2bn.

“I wouldn’t have thought it would be so successful,” said the first syndicate banker. “The world is still on the brink, but evidently people still have money to spend, and when they see a decent option to invest, they will do so.

“It was a very good trade and encouraging, no doubt about it.”

Another lead banker said ABN Amro in a defensive maturity was an ideal candidate to revive supply in size. He noted that while hedge funds were now all but absent from today’s order books, this meant that the quality and stickiness of orders was very high.

“That gave us a much clearer idea of what we could do,” he added. “Demand from central bank and treasury accounts was very strong from the start.

“Hedge funds were very rare, which is new but not a surprise – they were always going to disappear after the moves that we’ve seen over recent days.”

Although the new issue premium could be seen as 5bp versus comparables circulated by the leads, bankers said secondary prices on screens did not necessarily reflect where trades could be executed, and saw the re-offer spreads achieved today as successful for the issuers.

Mediobanca hit screens around 25 minutes after the Dutch bank, via BofA, Commerzbank, Crédit Agricole, Erste, Mediobanca, Santander, SG and UniCredit. They went out with guidance of the mid-swaps plus 35bp area for October 2029 OBG, expected rating AA+ (Fitch), guiding an expected size of €500m. Ater a little over two hours, the leads reported books above €1bn, and after around two-and-three-quarter hours, the spread was set at 30bp and the size at €750m on the back of more than €1.2bn of orders, including €25m of JLM interest. The final book was above €1bn, excluding JLMs.

“We were quite happy with the decision to go and the outcome,” said a lead banker, noting it reflected similar dynamics to ABN Amro’s deal.

He said the premium versus BTPs – ultimately 6bp-7bp – gave the trade good momentum with domestic accounts, encouraging other investors to get involved.

Should market conditions persist, further euro benchmarks should emerge soon, according to syndicate bankers. The public pipeline currently comprises two Canadian mandates in the three year part of the curve.

Plans for a debut covered bond from Fairstone Bank were announced on 21 September, with a roadshow following. BMO, DZ, LBBW, Natixis and RBC (arranger and sole structuring advisor) have the mandate for the three year euro benchmark, expected ratings Aa1/AA (high) (Moody’s/DBRS).

And plans for a €500m no-grow December 2029 covered bond for Equitable Bank were announced last Wednesday. Barclays, Commerzbank, DZ, Erste, LBBW, Scotiabank and TD have the mandate for the issuer’s latest deal.

Bankers suggested the more established Equitable could lead the way.

“In light of today’s supply, we would definitely recommend that at least they made use of this window,” said one. “Unless the world falls off a cliff overnight, they should stand a good chance to get it done.

“People have had enough time to make up their mind about those offerings, so if the option is there, they should shoot sooner rather than later.”