A Nordea Bank Finland covered bond contributed to a Nordic theme in the broader primary market yesterday (Wednesday), with a lead banker attributing the success of the deal in part to strong demand from bank treasuries under pressure to invest.

The issuer sold a Eu1.5bn seven year at 40bp over mid-swaps, the tight end of guidance of the 42bp over area, which followed initial price thoughts of the 45bp over area. Syndicate bankers on and away from the deal said the pricing did not incorporate a new issue premium.

BNP Paribas, Deutsche Bank, Nordea Markets and UBS were lead managers.

The deal was the third and biggest seven year benchmark in just over a week, and was priced on the back of around Eu3.2bn of orders from some 140 investors.

Germany and Austria took 39% of the bonds, the UK 17%, the Nordic area 11%, Asia/the Middle East 9%, Switzerland 7%, the Benelux 4%, France 5%, and others 8%. Banks were allocated 30%, insurance companies and pension funds 14%, managed funds 39%, SSAs/central banks 12%, private banks 4%, and others 1%.

A syndicate official away from the leads said a Eu2.25bn five year Nordea Bank Finland issue from January, the only other Finnish benchmark supply this year, was trading in the low 30s over mid-swaps and outstanding 2021s in the mid to high 40s over.

He added that with Nordea in the market alongside its sovereign selling a $1.5bn five year, and a $1bn three year for Denmark’s Kommunekredit, yesterday was “Nordic Day” in the new issues market.

“Usual Nordic magic does its trick,” he said. “Must have something to do with Santa and the reindeers… or a vision of stability and solidity.”

Improved market sentiment yesterday brought non-Nordic supply, too, with Land Nordrhein-Westfalen, for example, also turning to the dollar SSA market and the EU announcing a Eu2bn minimum 10 year deal, which has since been sized at Eu2.7bn.

Another syndicate banker away from Nordea’s deal said it was an “overwhelming” transaction that “speaks for itself”.

Armin Peter, head of covered bond business and syndicate at UBS, said that the seven year maturity has been in fashion recently despite typically not being a mainstream choice.

He said that the success of the deal was due to a mix of the quality of the credit and jurisdiction, its timing, and continued pressure on accounts to invest as funds from the ECB’s longer term refinancing operations (LTROs) remain available.

“Bank treasuries in particular feel the pressure,” he said, “as unlike in the past they now accept to go longer than five years, allowing the process to uncover bigger sized demand early and tighten spreads on the back of this.”

The prevailing strong demand from banks, added Peter, despite not necessarily being reflected in final distribution statistics, has an impact on deal execution by providing certainty and momentum, and also influences price and relative value considerations for real money investors in new issues.

“In the end, it helps everyone,” he said, “by providing tighter pricing for the issuer, well oversubscribed books and certainty of secondary performance.”

Peter said that market conditions have recovered to regain some of the ground lost since last Friday, with French and Dutch covered bonds tightening by 5bp and even peripheral issues outperforming yesterday, alongside strong improvement in senior unsecured and tightening of credit indices and Dutch government bonds.

And while markets are likely to remain volatile, he said, Nordea’s and other recently priced new issues show that “cash is out there, was out there and will be out there for the weeks to come”.

At the same time, he added, there may not be many issuance opportunities available before the summer, taking into account blackout periods, elections across Europe, ECOFIN meetings and public holidays.

“So issuance windows might remain short lived and should be used regardless of the fact that most issuers have done between 50%-70% of their funding,” said Peter.

A meeting of the Economic and Affairs Council (ECOFIN) takes place on 2 May.

A syndicate official away from the leads today (Thursday) said that the market is “on fire” and that he had hoped, seemingly to no avail, for follow-up issuance.

Another syndicate banker said the markets were correcting today, with French and Austrian government bonds widening, the Bund Future up 60 ticks, and stocks lower.

He said that he expects spreads will be tighter in the autumn, setting out a corresponding issuance strategy.

“As an issuer I would let it blow over,” he said. “Most issuers can afford to wait and although August-October is still three to four months down the line my guess is things will get better.”

The first senior unsecured FIG deals since Easter are hitting the market today, with Polish bank PKO out with a five year euro deal in the 260bp over area and the Netherlands’ NIBC with an 18 month fixed rate note.

France’s BPCE is understood to have tapped two covered bonds in private placements this week, in addition to a Eu600m increase sold on Tuesday. The private placement taps were done at the same time, and were a Eu205m increase of a March 2018 deal and a Eu350m increase of a February 2019 issue.

They were said to have been driven by reverse enquiries. A syndicate banker away from the taps said that BPCE had also tapped senior unsecured paper last week, and that together with the covered bond taps it had carried out “a decent block of funding”.