Although several EU banks have issued EuGBs since the Netherlands’ ABN Amro became the first financial institution to do so in February 2025, none had yet issued an EuGB in covered bond format. Some have noted the greater differential in execution – in terms of greenium, for example – achievable in unsecured green bonds, while the availability of appropriate assets and potential additional reporting requirements have been cited by others as a reason they have not issued EuGB covered bonds.

Nordea Mortgage Bank, the group’s Finnish covered bond issuer, previously sold three euro benchmark covered bonds under the Green Bond Principles (GBP) managed by ICMA, most recently a €750m three year in March 2025, while the group’s other Nordic covered bond issuers have similarly tapped local currency markets.

Keil, head of covered bonds at Nordea, said the banking group wanted to demonstrate its leadership in sustainable finance through the issuance of the first EuGB covered bond.

“We see ourselves as the leading sustainable issuer in the Nordics and want to remain at the forefront of developments,” he said. “This first ever EU Green Covered Bond and first EuGB from a financial institution in the Nordic region is a testament to that role and that ambition.

“Being an early adopter of EU regulation also shows our support for EU efforts to transition to the low carbon economy,” he added. “We haven’t yet seen where EuGBs will end up, but we are willing to push forward and lead the way in this area, to help strengthen their credibility and minimise the potential for green-washing.”

The additional requirements of EuGB regulation have contributed to only gradual take-up of the format by financial institutions so far, and Keil testified to the work the format involves.

“With a big team effort across the organisation,” he said, “we have spent a lot of time internally in establishing a truly robust internal set-up on processes to screen and select Taxonomy-aligned assets, and also meet the requirements on impact and allocation reporting as well as attain validation by our external reviewer. In EuGBs, we have stronger supervisory oversight compared to a traditional ICMA bond, and it is reflected in a robust internal governance.”

Nordea published the associated (six page) factsheet, which is required for EuGBs, on Monday, alongside a pre-issuance review from ISS confirming alignment with EuGB regulation and the EU Taxonomy. The factsheet notes that the EuGB also meet the GBP.

The proceeds from the bond will be used to refinance a Finnish portfolio of Taxonomy-aligned retail mortgages that support energy efficient housing. The portfolio is broadly similar to that eligible for the bank’s previous green bonds, even if EuGB requirements are stricter.

Nordea’s deal hit the market after the first two days of the week passed without any financial institutions supply in euros on the back of the latest bout of volatility, particularly evident on Monday. Improved sentiment on Tuesday nevertheless encouraged issuance in other asset classes and currencies, and on Wednesday, alongside Nordea, Australia’s Westpac sold a €1bn short five year covered bond, with further FIG supply in senior and even AT1 formats. The two covered bonds were the first new euro benchmarks in the asset class since Tuesday of last week (17 March).

“Our ambition has over the last years been to come with a green covered from each of our four mortgage companies each year as part of our sustainable issuance ambitions,” said Keil (pictured). “With that in mind, we decided to proceed with this after seeing the relatively constructive tone yesterday.

“The three year tenor meant that the offering was already on the defensive side, and it’s also a good spot on the curve currently,” he added, “but then the green format, and furthermore the EuGB format, makes it stand out more in a market like this.”

Leads Crédit Agricole, Deutsche, DZ, Nordea and SG opened books with initial guidance of the mid-swaps plus 16bp area for a euro benchmark-sized April 2029 issue, expected rating Aaa. After around two-and-a-quarter hours, they reported books above €1.25bn, including €100m of joint lead manager interest, and an hour later, the spread was set at 11bp for a €1bn size on the back of books above €1.4bn. The final book was above €1.37bn, including €100m of JLM interest, with around 50 accounts participating.

“We saw a positive opening of the market, but you never know these days, so we went into this aware of the volatility and headline risk,” said Keil. “But from the get-go we saw that the book was building well, and we were able to land at a very good level.”

The spread of 11bp over mid-swaps is the tightest on a euro benchmark covered bond since October 2023, when Germany’s LBBW sold a €500m three-and-a-half year public sector Pfandbrief at the same level.

“That goes to show how the resilience of the euro covered bond market amid volatile markets,” said Keil, “but also how this is reinforced by the addition of a green or EuGB label to an issuance.”

Around three-quarters of the deal was allocated to investors with strong sustainability commitments or ESG-dedicated funds, according to the issuer and leads’ classification, which Keil said was overwhelming.

“We were absolutely happy with the level of interest and the fact that we saw so many dedicated ESG investors,” said Keil. “That share is much larger than on our previous green bond issuances in traditional ICMA format, suggesting that this EuGB format can reach a broader range of investors.”

Banks and private banks took 55%, asset managers 24%, central banks and official institutions 10%, insurance companies and pension funds 7%, and corporates 4%. Germany, Austria and Switzerland were allocated 54%, the Benelux 23%, France 12%, the Nordics 6%, Italy 3%, and the UK and Ireland 2%.

The leads put the new issue premium at 2bp and claimed a greenium of 1bp, although Keil acknowledged that this was hard to assess in current markets.

“Again, we see less greenium in covered formats than in senior and subordinated, so this was in line with what we expected, rather than any sudden improvement on this EuGB,” he added. “And maximising greenium is not the underlying motivation for using the EuGB format.”

Having debuted in the format, Nordea expects to stick with it, even if GBP green bonds are expected to co-exist with EuGBs for the foreseeable future.

“We have done this because we believe in the format,” said Keil, “and we believe there is a future here. Our intention is not to do it once and then go back to issuing in ICMA format.

“It will depend on how the market evolves and how issuance is received, but based on yesterday’s deal, there is clearly an interest among investors, so, all else being equal, we will probably pursue the path of EuGBs going forward.”

As well as covered bond issuance in local currencies from its other issuers in Denmark, Norway and Sweden, Keil said Nordea could also consider unsecured EuGBs.

On 23 February, LBBW launched the tender for up to €750m of a mix of mortgage and public Pfandbriefe in maturities ranging from November 2026 to July 2029 totalling €4.65bn. Caps for individual lines were set to ensure retention of ECB/LCR and index eligibility.

The German bank also went out with a €500m no-grow eight year public Pfandbrief in its first benchmark since May 2025, when it issued a €500m 10 year public Pfandbrief.

LBBW first engaged in a liability management exercise two years ago, for its Additional Tier 1 (AT1) issuance, and turned to it again when looking at its funding programme for this year and liability structure, according to head of funding Martin Rohland.

“On the AT1, we had a different target, which was to keep investors in the credit and derisk the new issue,” he told The CBR, “but at the end of the day, it was helpful in opening up a new tool for us to use.

“When we looked at our liquidity position coming into this year, our numbers are a bit smaller than last year, when – including Berlin Hyp – we were quite active, so we thought, how can we pro-actively manage this?”

The bank therefore targeted the six short-dated benchmarks, while issuing a new longer dated transaction.

“It’s an optimisation of the bank’s liquidity stack and its structural liquidity position,” said Andreas Wein, head of funding and debt investor relations at LBBW. “We felt that we could make use of the current market environment to do this and also return after having been absent since May last year.”

The new €500m no-grow February 2026 issue, rated Aaa, was priced at mid-swaps plus 22bp on the back of a book of some €1.18bn (including €175m of joint lead manager interest), following guidance of the 27bp area.

Forty-eight accounts were allocated, 55% going to banks, 22% to central banks and official institutions, 18% to asset managers and fund managers, 4% to insurance companies and pension funds, and 1% to other investors. Germany, Austria and Switzerland took 57%, the Benelux 18%, the Nordics 8%, southern Europe 7%, the UK and Ireland 5%, and other 5%.

While the market was not experiencing the heady order books of the start of the year – when LBBW might historically have been expected to hit the market – the bank was able to tap into attractive levels with its new issue.

“We started the year with a very comfortable liquidity position,” said Wein, “hence, we had no need to be first out of the blocks. We kept monitoring the market and saw that spreads were only going in one direction, and at the end of the day managed to issue at pretty much the lowest day of the year so far – although you could say that was as much down to luck as skill.”

The market subsequently softened as Israel and the US attacked Iran, with estimates last week suggesting LBBW might have had to pay 4bp more for such a new issue in the wider market, which saw no new euro benchmark covered bond issuance. The new issue was nevertheless stable at or slightly inside re-offer, according to Rohland.

The tender offer closed last Tuesday and, with €1.049bn of bonds (23%) tendered by investors, LBBW decided to buy back as much as €1bn, 95% of the tendered amount and 22% of the outstandings.

“We included a wide range of short dated paper – some of it above par, some below – to give the biggest audience the chance to participate,” said Rohland, “and we were quite pleased that it was not all skewed in one direction or the other.

“Some of the investors who tendered took the premia so they could buy some new, longer dated paper, while others used the money for different purposes.”

He noted that the Iran war did not have any noticeable impact on the conduct of the liability management exercise.

“It was definitely a greater success than we would have hoped for or expected,” added Wein, “so we are extremely pleased. It also shows a good mutual engagement with the large professional investors who were active in both legs of the transaction, which can only be conducive to business with them going forward.”

The Norwegian covered bond was only the second euro benchmark covered bond in green, social or sustainable format to have been issued this year, after a €500m seven year inaugural Green Pfandbrief for Hamburger Sparkasse on 3 February. It is also only the second green covered bond from SR-Boligkreditt – the covered bond issuer of SpareBank 1 Sør-Norge – after a €500m seven year debut in 2019.

“It’s a long time since we’ve done a green covered – indeed, this is only our second overall,” Hjelle told The CBR. “And as we have assets under the green bond framework that we can utilise, we decided to add the green mark to it and show the covered bond investor community that we also direct our green assets there, and not only for senior preferred and non-preferred.”

The use of proceeds of SR-Boligkreditt green covered bonds – issued under a common framework with SpareBank 1 Sør-Norge green bond issuance – is green buildings, while other categories in the group framework include renewable energy and clean transportation.

With parts of Germany enjoying the Karneval holiday on the Tuesday, SR-Boligkreditt lined up launch for last Wednesday (18 February), and ultimately hit a relatively clear market, with only one other issuer – Italy’s Banco BPM – in the market that day, two others having opted to move on the holiday.

On Wednesday morning, leads DZ, Erste, ING, LBBW and Natixis opened books with guidance of the mid-swaps plus 30bp area for a benchmark-sized February 2033 issue, expected rating Aaa. After around an hour and a quarter, they reported books above €2bn, including €275m of joint lead manager interest, and after around two-and-a-half hours, the spread was set at 22bp on the back of more than €2.5bn of orders. The size was then set at €1bn (NOK11bn) on the back of a final order book above €2.09bn, including €250m of JLM interest, with more than 85 orders good at re-offer.

According to Hjelle (pictured), the order book is the biggest of any SR-Boligkreditt covered bond, marginally higher than its previous high.

“We are very happy with the way the book turned out,” he said, “and it was interesting to see how granular it was, with not much fast money.”

According to a lead manager, 67% of investors allocated have a green mandate, with 22% classified as dark green.

Banks and private banks took 62%, asset managers and funds 20%, central banks and official institutions 15%, and insurance companies and pension funds 3%. Germany, Austria and Switzerland were allocated 58%, the Benelux 13%, the UK and Ireland 13%, France 7%, the Nordics 5%, and other 4%.

Hjelle suggested several factors played into the deal’s success.

“There hasn’t been much green supply in covered,” he said. “And then there’s good demand for the SR-Boligkreditt name, because we haven’t been that active, and that’s also the case for the Nordics in general.

“We also understood that at this time the seven year maturity was sought after. And having the day almost to ourselves was positive.”

The level of demand enabled SR-Boligkreditt to achieve the €1bn it was targeting. The issuer guides investors that €750m is its typical size, with €1bn or €500m possible depending on how strong or not the market may prove. Its last euro benchmark, a five year in June 2025, was €750m, with a €500m eight year having preceded that in February 2024.

The leads put fair value at 22bp, implying a new issue premium of zero. Hjelle noted that this was based on the issuer’s conventional curve, and suggested that the ultimate pricing at 22bp was attributable to the green nature of the new issue, while an unlabelled bond would have come at 23bp.

“I was hoping for 22bp,” he added, “but expecting 23bp.”

With the issuer having guided the market for approximately €2bn of covered bond issuance this year, it could return in 2026, said Hjelle.

SpareBank 1 Sør-Norge is meanwhile looking forward to welcoming the covered bond community to its home town of Stavanger for the latest annual spring European Covered Bond Council meeting, in early May.

“We are looking forward to this and proud to be hosting events in our auditorium,” said Hjelle.

Since Arion sold the first euro-denominated Icelandic covered bond in September 2021, a €300m five year deal, its covered bond rating has improved from A- at S&P to Aa1 at Moody’s.

Arion’s covered bonds had in November 2023 been upgraded by S&P, for a second time, to A+, alongside those of its compatriots, on the back of a sovereign upgrade, before the covered bond rating was withdrawn in March 2024. This followed a consent solicitation exercise launched in February 2024 to remove the S&P rating as well as related clauses from its documentation, leaving the covered bonds rated by Moody’s, which had assigned them a rating subsequent to the euro debut.

The move was the consequence of a broader review of credit ratings by Arion, which decided that rather than the two ratings for the bank it had, one rating would suffice, taking into account considerations such as Nordic banks with similar size and operations only having a single rating. Out of Moody’s and S&P, it dropped the latter for all its ratings, with the bank saying that Moody’s was more appropriate given Arion’s bancassurance business strategy. The bank had recently been upgraded from BBB to BBB+, with stable outlook, by S&P, while its Moody’s rating was A3, with stable outlook, the same as currently.

Arion’s new issue comes ahead of the maturity in October of its debut, which was tapped for €200m in 2022 to take it to €500m.

According to Jónsson at Arion Bank, the issuer stepped up its covered bond investor relations work in the second half of 2024 before moving up a gear last year as the maturity approached. The bank then targeted a new euro issue in the first quarter in its funding plan.

“That played out very well,” he told The CBR.

After announcing its Q4 2025 results on 11 February, the bank on Monday of last week (16 February) announced the mandate for a €300m (ISK43bn) no-grow five year covered bond.

The bank also announced an any and all tender offer for its outstanding euro covered bond issue.

“One reason for the buyback was to support the new issue by giving existing investors the opportunity to rotate out of the old issue into the new one,” said Jónsson (pictured). “Secondly, there were internal considerations, including reducing our outstanding wholesale funding and managing our short term maturity profile.”

Leads Barclays, DZ, Erste and UBS opened books for the new issue last Tuesday morning (17 February) with guidance of the mid-swaps plus 47bp area for the April 2031 sub-benchmark. After around an hour and 20 minutes, they reported books above €900m, including €185m of joint lead manager interest, and after around two-and-three-quarter hours, they set the spread at 40bp on the back of books above €1.1bn, pre-reconciliation. The final book was some €1.1bn, with 46 accounts good at re-offer.

“We are very pleased with the transaction,” said Jónsson. “We struck a nice balance between good pricing and the quality of the order book.

“I believe there is clear evidence from our recent transaction that the higher rating supported the new issue,” he added. “We saw a more granular and diversified order book. Our current rating is closer to what investors are used to in the covered bond space, namely Aaa.”

The lack of recent Icelandic covered bond issuance – the last having been a €300m five year deal for Landsbankinn in March 2023 – necessitated a degree of price discovery, he noted. The leads therefore circulated a mix of recent references in the five year part of the curve, including Finnish sub-benchmarks for Ålandsbanken and Hypo, non-Eurozone benchmarks from Bendigo Bank and SMBC, as well as a Aa2-rated benchmark from Italy’s Banco BPM.

“And then,” added Jónsson, “there was of course some dialogue with potential investors about how they would view the transaction.”

The €1.1bn book is the biggest of any Icelandic euro covered bond.

“We were pleasantly surprised by the demand,” said Jónsson. “The order book grew quite quickly and we ended up around 3.5 times oversubscribed, which was far above what we had expected.”

Asset managers took 37%, banks 31%, central banks and official institutions 19%, hedge funds 10%, and insurance companies and pension funds 3%. Germany, Austria and Switzerland were allocated 36%, the Nordics 32%, the UK 11%, the Benelux 9%, Italy 8%, France 2%, and CEE 2%.

Ahead of the new issue, Arion had internal discussions as to whether to go for a benchmark, €500m size, or continue with sub-benchmark issuance, ultimately deciding on the latter course so that it will have the capacity to return sooner.

“We are quite keen to become a more frequent issuer in the euro covered bond market,” said Jónsson. “It’s been five years since we did our last issue and three years since the last Icelandic covered bond in the euro market. And it’s clearly beneficial to be a bit more frequent – we saw that, for example, from this exercise and the price discovery that we had to do as a result of being infrequent.

“So while we can’t promise that we will issue every year or every other year, we strive to become a more frequent issuer – it won’t be five years before the next one. And if we start to see more frequent covered bond issuance from the Icelandic issuers, that will help everyone here in Iceland.”

Landsbankinn’s issue is due in March 2028, while the third previous Icelandic covered bond, a €300m five year for Íslandsbanki issued in September 2022, matures in September 2027.

Haspa’s green finance framework was published in November and the new issue is its first green bond in any format. Its green issuance is aligned with the Green Bond Principles as well as the vdp’s Green Pfandbrief minimum standards.

“By issuing green bonds, Haspa will enable investors to support its strategic ambition of providing financing dedicated to key environmental challenges in the city of Hamburg and the metropolitan area,” it said.

The inaugural green bond comes after it in February 2025 became the first German bank to issue a social senior preferred bond with its debut social bond.

“When we started with the idea of issuing ESG bonds a year and a half ago, we had a holistic approach, to look at social bonds and green bonds, too,” said Zillmann, funding and investor relations at Haspa. “With green bonds, it takes a while to collect all the data, all the EPCs, for example, and to put them in the system to that you can report on the energy efficiency and analyse it.

“Last year we made quite some progress so that we now have a green finance portfolio of more than €800m. So far, this only consists of commercial buildings – mainly multifamily housing and office buildings – but in the next phase, we also want to include private houses, then our portfolio will grow such that we can issue more green bonds.”

With the framework in place, Haspa was targeting a debut in the first quarter of this year, and was happy to see the covered bond market open strongly.

“We saw the first wave of issuance at the beginning of the year and conditions were great for issuers, with deals five, eight times oversubscribed, and spreads tightening in,” said Zillmann. “That’s when we started thinking that it could be interesting to issue sooner rather than later.

“And then – as with our debut public covered bond – we were the only German issuer on the day of launch, so we had all the attention of investors. In this respect, it was good timing.”

Haspa sold its first public sector Pfandbrief benchmark in October, a €500m long six year deal.

The bank’s green debut is also the first green benchmark covered bond of the year, with pent-up demand evident after the mandate was announced late Monday morning.

“We already had some investors telling us that they needed some green Pfandbrief for their green portfolios,” said Zillmann (pictured), “as there hadn’t been much supply in the past four months. It gave us good confidence beforehand that the deal would be successful.”

The market was meanwhile stable yesterday, after some volatility carried over from last week into Monday morning but then dissipated, he noted, with MünchenerHyp issuing a €500m seven year Pfandbrief and DekaBank a sub-benchmark.

Yesterday morning, leads Commerzbank, Crédit Agricole, Danske, DekaBank and Erste went out with guidance of the mid-swaps plus 27bp area for the €500m no-grow February 2033 green mortgage Pfandbrief, expected rating Aaa. After around an hour and a quarter, they reported books above €1.75bn, including €250m of joint lead manager interest, and after around two hours and 10 minutes, they set the spread at 20bp on the back of books above €2.1bn. The final order book was above €1.75bn, including €250m of JLM interest.

“We are very happy with the outcome,” said Zillmann. “The final order book was 3.5 times oversubscribed and mid-swaps plus 20bp is a really good level for us in absolute terms, but also a good level relative to peers.”

A banker at one of the leads put pricing flat to fair value, while another said the deal came inside fair value and offered a rare example of a greenium in covered bonds. According to pre-announcement comparables circulated by the leads, MünchenerHyp’s new seven year was at 17bp, mid, while among January supply, BayernLB April 2034s were at 20bp, Helaba January 2035s at 21bp, and NordLB February 2033s at 22bp.

“On the one hand, the green aspect supported good pricing – we had a relatively high share of investors that have a focus on ESG,” said Zillmann, “and on the other, it is a product of the journey we have had over the past one-and-a-half to two years, raising our profile in the markets, so that investors tend to perceive Haspa as a regular issuer now, which also tends to help in terms of demand.”

According to a lead manager, 45% of the paper was distributed to ESG-focused accounts. Banks were allocated 61%, funds 15%, insurance companies and pension funds 15%, government and agency accounts 9%. Germany took 63%, the Nordics 19%, Italy 6%, the Benelux 6%, Austria and Switzerland 3%, and other 3%.

Although Haspa has now established its green and social issuance – as well as public Pfandbriefe alongside mortgage Pfandbriefe – Zillmann noted that it still has the flexibility within its frameworks to issue, for example, a social public Pfandbrief or a green senior preferred.

“Of course, we will have to see how our funding plans develop in general, which will in general depend on loan growth,” he added. “What I can say is that we want to be a regular issuer and therefore will be in the market every year.”

The start to the year has been characterised by buoyant long-dated issuance, with record-breaking 10 year supply in the first week of the month followed up by two 12 year trades. After also considering the 12 year tenor, Deutsche Kreditbank (DKB) opted for the 15 year maturity, thereby extending further supply.

“This demand has been a continuation of what we saw at the end of last year,” Lukitsch told The CBR, “with a lot of interest in long maturity private placements. We had specific feedback from investors to this effect: one large asset manager that doesn’t normally buy covereds but only focuses on SSAs, for example, said that this particular issue would prove interesting for them value-wise, so they decided to participate.

“We are happy to be in a position where we are able to fulfil such needs in this maturity segment with large issues, thanks to our asset structure and the quality of our cover pool.”

DKB had been eyeing the end of January for a first benchmark of the year and found conditions to be benign this week.

“The market was in a very positive mood in the first two weeks,” said Lukitsch, “and then there was a little bit of headline-induced volatility, but that dissolved quickly. We had been concerned that we might have missed the window, but it was clear that there was still a lot of investor appetite in the market and so we decided to proceed.”

Following a mandate announcement on Monday morning, yesterday morning leads ABN Amro, BayernLB, Crédit Agricole, NordLB, TD and UBS opened books with guidance of the mid-swaps plus 50bp area for a euro benchmark-sized February 2041 public sector Pfandbrief, expected rating Aaa. After around 55 minutes, the leads reported books above €2.6bn, excluding joint lead manager interest, and after around an hour and a quarter, they set the spread at 42bp and the size at €1bn on the back of books above €3.4bn, including €237m of JLM interest. The final book was above €4.4bn, with 128 accounts.

“I believe it’s by far our biggest book,” said Lukitsch. “And we were surprised how quickly it grew: it was already past €2bn in not even 30 minutes.”

The one-and-a-half day process helped, with more than 90 investors giving feedback ahead of launch, many giving encouraging indications of interest, and some ultimately participating despite having said they would not.

Relatively elevated yields at the long end have been cited as driving long end demand in recent months, and Anna Hawelka, funding and investor relations, DKB, said the 3.5% coupon proved attractive to insurance companies in particular, contributing to the initial momentum.

“It drew a lot of attention from southern Europe,” added Lukitsch, “from Italian, Portuguese and Spanish accounts that may have felt Germany was otherwise too tight a space for them.

“The book was very diversified and the number of investors was very high compared to our typical transactions.”

Germany was allocated 62%, southern Europe 6%, the UK and Ireland 6%, France 6%, the Benelux 5%, the Nordics 5%, Austria and Switzerland 4%, Asia 4%, and others 2%. Asset managers and fund managers took 39%, banks 28%, insurance companies and pension funds 23%, and central banks and official institutions 10%.

The re-offer spread of 42bp over mid-swaps was seen as flat to fair value and at the tight end of what DKB had been hoping for.

“We considered starting with IPTs somewhere between 48bp and 50bp, anticipating tightening of probably 6bp, but we wanted to collect €1bn and to be sure that we would have the book to do so, and therefore started with the 50bp area,” said Lukitsch. “After we did so, we had such a large oversubscription with good quality accounts that we realised we had the opportunity to land at 42bp.

“It was the right decision, as there was no attrition – almost all the limits were at re-offer or changed to re-offer – and there was even growth in the book after we fixed the spread at 42bp. We are now seeing good performance in the secondary market, so the strategy was good for both sides, for investors and for the issuer.”

The €1bn issue puts DKB in a comfortable position vis-à-vis its funding target for the year of around €2.5bn, and Lukitsch said the issuer may opt for larger sizes than its historical €500m standard again.

“This represents a slightly adjusted strategy for the capital markets funding, because in the past we used ‘will-not-grow’ for almost all transactions,” he said. “But as the bank grows, the balance sheet grows, and the share of capital markets funding increases, so maybe we will consider this more often, taking more off the table if the market allows it.”

No new euro covered bond benchmarks hit the market on Monday, and the wider FIG market was quiet, after US president Donald Trump stepped up his Greenland campaign with the threat of tariffs for Europe’s most vocal opponents and the potential for EU retaliation.

Syndicate bankers said that after some time for market participants to digest the news and its implications, primary had been ready to pick up, albeit more cautiously.

And after a mandate announcement for Bausparkasse Schwäbisch Hall on Monday, leads Crédit Agricole, Commerzbank, DZ, Helaba, ING and RBI on Tuesday morning opened books for the benchmark with guidance of the mid-swaps plus 42bp area for the €500m no-grow January 2038 mortgage Pfandbrief.

After around an hour and five minutes, they reported books above €1bn, excluding joint lead manager interest, and after around two-and-a-quarter hours, the spread was set at 36bp on the back of books above €1.3bn, including €120m of JLM interest. The final book was above €970m, including the €120m of JLM interest, with 54 accounts.

While demand was already lower last week than in the bumper first week of the year, a syndicate banker at one of the leads said that Bausparkasse Schwäbisch Hall’s tenor was the main driver of the magnitude of its book.

“When you are opting for a maturity of 12 years, or anything longer than 10 years, you don’t have the fast money that drives up the order book €1bn or €2bn,” he said. “What we had was high quality and I’m a fan of such books – you could even allocate nearly everybody in full as these accounts really want the bonds. It’s different to the bigger books where some accounts can’t even stand 5% or 10% of what they ordered.

“And with the tightening of 6bp, the issuer is very happy.”

The new issue premium was 3bp-4bp, according to another lead syndicate banker. According to pre-announcement comparables circulated by the leads, Bausparkasse Schwäbisch Hall October 2035s were trading at 28bp, mid, while 2036 benchmarks issued by Commerzbank and DZ Hyp this month were quoted at 27bp and 28bp, respectively.

Banks took 41%, asset managers and fund managers 27%, insurance companies and pension funds 18%, and central banks and official institutions 14%. Germany was allocated 77%, Norway 11%, Austria 8%, France 2%, the UK 1%, and Luxembourg 1%.

“The solid demand in our order book in geopolitically turbulent times is a fitting reward of our investor base and at the same time reflects the high quality of Bausparkasse Schwäbisch Hall as a covered bond issuer,” said Michael Wuest, manager, funding and investor relations, at the German bank.

Following a mandate announcement on Tuesday, Hypo Oberösterreich (Hypo OOE) leads DekaBank, DZ, NordLB and RBI this morning opened books with guidance of the mid-swaps plus 35bp area for the €250m no-grow March 2031 mortgage Pfandbrief, expected ratings AA+ (Fitch). After around an hour and 40 minutes, they reported books above €510m, excluding JLM interest, and after around two-and-a-half hours, the spread was set at 30bp on the back of books above €640m, excluding JLMs. The final book was €585m, excluding JLM interest, with 44 accounts.

According to a syndicate banker at one of the leads, the process was run relatively quickly so that it could be wrapped up before Trump gave a much anticipated speech at the World Economic Forum in Davos this afternoon.

“You never know what will happen,” he said. “Maybe Austria is the next target.”

The banker noted that the Republic of Austria itself had acted similarly fast yesterday, pricing a €6.75bn dual-tranche trade before Trump’s speech despite having to manage a staggering €116bn order book.

He put fair value at 27bp, and hence the new issue premium at 3bp.

“We had a lot of very high quality investors, and we thought that going below the 30bp level would have the impact that a few of them might drop out, so the issuer invested 1bp to keep them involved.”

Banks were allocated 61.8%, agencies and official institutions 26.5%, asset managers 7.9%, and insurance companies and pension funds 3.8%. Germany took 47.3%, Austria 25.6%, the Nordics 12.0%, Italy 6.6%, the Benelux 5.0%, CEE 2.8%, and other 0.7%.

Principality is the UK’s sixth largest building society, with £14.1bn in total assets, with all of its larger peers having already entered the covered bond market, and it sees the additional funding option as supporting its sustainable growth ambitions.

The debut was the culmination of 18 months’ preparations, during which time the building society worked on the programme with the support of joint arrangers BNP Paribas and HSBC and its legal advisors, A&O Shearman, as well as its peers within the UK Regulated Covered Bond Council (UK RCBC).

The programme was approved by the Financial Conduct Authority (FCA) in September, after which Principality held investor roadshow meetings in the fourth quarter. With a prospectus dated 19 December, the groundwork had thus been laid for a potential January debut that could build on this momentum.

Nationwide showed the sterling covered bond market to be in great shape when it reopened the market on 9 January with a dual-tranche trade split into £750m three-and-a-half year FRN and a rare £1bn short seven year fixed rate tranche.

“That enjoyed a fantastic outcome and demonstrated the liquidity that was available,” said James Whetman, managing director, FI DCM at HSBC, “and the Principality team were keen to take advantage of a good window in which to get their name established.”

The mandate for the £500m (€577m) no-grow five year floating rate note was then announced last Monday (12 January), with further investor calls and feedback collected before the deal was launched on Wednesday morning.

Joint leads BNP Paribas and HSBC opened books with guidance of the Sonia plus 55bp area for the January 2031 covered bond, expected ratings Aaa/AAA (Moody’s/Fitch). A first book update put demand above £975m, including £30m of joint lead manager interest, and after close to four hours, they set the spread at 50bp on the back of books above £1bn, pre-reconciliation and excluding JLM interest. The final book was above £1.05bn.

The leads saw fair value for larger peers at around 47bp, with comparable five year FRNs issued last year by Coventry, Leeds and Skipton trading around Sonia plus 45bp-46bp, and the curve extension worth 1bp-2bp.

“On that basis, 50bp was an extremely good result,” said Whetman, “very compressed to the rest of the market, with just a bit of premium to reflect this being an inaugural trade and anything that may be appropriate for the credit.

“UK bank treasuries were delighted to see a solid new name establishing a presence in this market,” he added, “and Principality enjoyed strong interest from this investor community – but also really good asset manager demand.”

The size and price met the issuer’s ambitions for an inaugural benchmark.

“Principality is delighted to diversify our wholesale funding sources through the covered bond issuance, allowing us to establish a broader investor base to build on in the future,” Chris Peters, Head of Balance Sheet Management at Principality Building Society, told The Covered Bond Report.

As well as investor diversification, the building society sees quicker access to markets as a reason for entering the covered bond market. Principality will meanwhile retain its established Friary residential mortgage-backed securities franchise alongside the programme to keep its funding options open – it has £1.025bn of RMBS outstanding.

“Covered bonds offer issuers additional flexibility versus standalone RMBS,” said John Millward, managing director, structured finance group, HSBC. “It allows them to access the market more nimbly and opportunistically, with a shorter turnaround time, wider investor base, and broader range of maturities available.

“The covered bond programme therefore significantly increases Principality’s wholesale funding capacity.”

The last new entrant to the UK covered bond market, Paragon Bank, pioneered buy-to-let collateral in its issuance, but Principality’s is broadly in line with the established programmes of its peers.

While 24% of its mortgage lending is in its home territory of Wales, the balance is spread across the rest of the UK. Its initial cover pool is £965m.

Principality now sees covered bonds as central to its wholesale funding plans and expects to be in the market annually, initially in sterling before exploring different tenors and currencies in the medium term.

The deal is the first off a EUR3bn structured covered bond programme. Israel’s market-leading bank, with a 29% market share, Bank Leumi has a ILS 154bn (€42bn) mortgage book.

Bank Leumi was the first Israeli bank to tap international debt markets, in 2020, and has issued senior and Tier 2 bonds in dollars, but had not previously issued in euros.

“We have needs not only in shekels, but also in foreign currencies – euros, dollars and so on,” Ziv, head of capital markets at Bank Leumi, told The Covered Bond Report. “Bank Leumi doesn’t take any foreign exchange exposure, but finances loans in euros, for example, by sourcing funding in euros. So we were looking for a vehicle that would be a source for these needs on top of deposits.

“Also, due to the war, there was pressure on the rating of Israel and Israeli banks, so we had been seeking out a product that would give bondholders more security and hence achieve higher ratings.”

The bank is rated Baa1 (negative outlook), BBB+ and A- by Moody’s, S&P and Fitch, respectively, having been downgraded during the conflict, while Israel has faced downgrades leaving it at Baa1, A and A, with the Moody’s and Fitch ratings on negative outlook.

Bank Leumi therefore turned to covered bonds. And without specific legislation in Israel, Bank Leumi began working on a structured programme, with Barclays as sole structuring advisor.

“Our strategy was to be as close as we could to the European Directive,” said Ziv. “In every aspect, we took a conservative approach in order to avoid any concerns over our structure.”

Using their covered bond rating methodologies, Moody’s and Fitch assigned expected ratings of Aa3 and AA- to Bank Leumi’s issuance.

“We looked at the European best practices, with the Directive there, and also at non-EEA countries like Canada, Australia and Singapore that use the SPV guarantor structure, and suggested Bank Leumi commit to certain provisions and features so that this has everything an investor would expect to find when buying a covered bond,” said Elena Bortolotti, global head of covered bonds and head of structured solutions for EME at Barclays.

The issuer is also committed to providing, on a quarterly basis, the Harmonised Transparency Template (HTT), despite not being eligible for the Covered Bond Label (which is only available for legislative covered bonds).

“The market’s reaction has been extremely welcoming and positive,” said Bortolotti.

As a structured covered bond from Israel, Bank Leumi’s issuance is neither LCR‑eligible nor ECB-eligible. Furthermore, as it is not eligible to be recognised as a covered bond under the applicable regulatory frameworks, the issuance could instead be treated as senior unsecured debt. It is expected to qualify for inclusion in the iBoxx EUR Benchmark Index as well as the Bloomberg covered bond indices.

In light of its characteristics, the leads drew attention to where structured covered bonds, including SMBC and UBS, were trading, but also – given the Japanese and Swiss covered bonds’ triple-A ratings – where legislative covered bonds with similar ratings to Bank Leumi’s were seen.

Having prepared its programme, and after the adoption of a peace plan in October, the bank eyed the beginning of the year for its inaugural issuance.

“Firstly, January is one of the best times of year to come to the international market, so we usually target it,” said Ziv (pictured). “Secondly, we have been considering the issuance for a long time, but we waited until the war ended.”

He noted that two other Israeli bond issues had already been executed this month.

“We also saw that currently demand around covered bonds would work in our favour,” added Ziv.

The bank announced its planned debut on Tuesday of last week (6 January), then held a roadshow until Monday.

On Tuesday morning, leads Barclays (global coordinator), Goldman Sachs, JP Morgan and UBS opened books with guidance of the mid-swaps plus 78bp area for the €750m (ILS 2.8bn) January 2031 transaction, expected ratings Aa3/AA- (Moody’s/Fitch). After a little over two hours, they reported books above €3.5bn, including €400m of joint lead manager interest, and after around four hours and 10 minutes, they set the spread at 68bp on the back of books above €4.1bn. The final order book was around €4.6bn, including €450m of JLM interest.

“We are delighted with the issuance,” said Ziv. “The level of demand was really amazing. And after we closed the book, there were even more investors trying to enter at the closing price. We could have taken it tighter, but because it is our first issuance, we wanted to leave something on the table for investors.”

“There were lots of investors who had never invested in Bank Leumi – we saw demand from Switzerland, Germany, Portugal, Spain, the Middle East, and other countries and also many of them were not those we typically see investing in banks,” said Ziv.

As well as the structure of Bank Leumi’s programme and market conditions, he attributed the strength of demand to investors being impressed by the performance of the Israeli economy and the bank, particularly against the geopolitical backdrop they have faced.

“They were impressed by the fact that, although Israel was involved in a war for two years – its longest since being established almost 80 years ago – GDP growth was 2.8% in 2025 and is in 2026 expected by the Bank of Israel to be 5.2%, which is three times that forecast for the OECD,” said Ziv. “And furthermore, that Bank Leumi, in years of war, has consistently delivered strong ROE of 15%-16%. Finally, Bank Leumi has one of the lowest cost-to-income ratios in the world.

“I know that a lot of banks speak about technology,” he added, “but the fact that we have year after year been able to improve our cost to income ratio – now at 27% – speaks for itself. Israel is known to have a very strong high tech sector, and we have implemented the most advanced technology not only in operational activity and in getting our customers to access most of their services digitally, but also in underwriting systems and data analysis, which also contributes to our very low credit loss expense ratio year after year.”

Having inaugurated its programme, Bank Leumi’s aim is to build a covered bond curve in the international market, said Ziv. Until dedicated covered bond legislation is enacted, any issuance will require approval from the Bank of Israel.

Other Israeli banks are meanwhile expected to follow in Bank Leumi’s footsteps.

“We are very proud to have been the pioneer of covered bonds in Israel,” he said. “It has opened the window to significant new investment, not only for Bank Leumi, but for the Israeli economy and the banking industry.

“There is a lot of enthusiasm, because we issued 20bp inside the sovereign. I believe that not only banks here in Israel, but also other financial institutions, understand the advantages of the instrument to their liability structure and are now looking at covered bonds.”

The Bank of Israel is considering establishing a regulatory framework for covered bonds, according to Ziv, which would cement the position of the instrument in the country and also offer the prospect of tighter pricing.

The new issue had also already tightened by 5bp yesterday (Thursday) morning, and he noted that performance could be boosted by increasing participation among Israeli investors, who are only able to buy in the secondary market and only now getting more familiar with covered bonds.

The mandate for Caffil’s 10 year benchmark was announced at around 12.00 CET on Thursday, just as BPCE was wrapping up a €1.5bn issue in the same tenor that had also attracted one of the largest ever order books, at some €8.6bn. That in itself was the third of four French 10 year transactions last week, including Caffil’s, after Arkéa Public Sector SCF had reopened euro benchmark covered bond issuance on the Monday with a €750m deal that attracted over €3.6bn of orders, and CRH had on Wednesday generated a €5.2bn-plus book for a €500m trade.

“Caffil is typically a long-dated player, and we knew already in December that the appetite for duration was likely to develop well, given the higher interest rate environment we have observed since November,” said Veillas, “and especially for French covereds, given the stronger relative value versus other jurisdictions.

“And that’s what we saw crystalise on all four 10 year transactions that came out of France last week.”

On Friday morning, leads BNP Paribas, Crédit Agricole, JP Morgan, Natixis and NordLB opened books with guidance of the mid-swaps plus 62bp area for a euro benchmark-sized transaction, expected ratings Aaa/AAA (Moody’s/DBRS).

After around 40 minutes, they reported books above EUR4.2bn, including EUR525m of joint lead manager interest, then after around an hour and a half, they set the spread at 51bp and the size at EUR1bn on the back of books above EUR8.7bn, pre-reconciliation and including EUR575m of JLM interest.

The final order book reached €10.1bn, the biggest ever for a euro covered bond, with 180 investors participating. The previous largest such book is believed to have been EUR9.2bn for a Deutsche Postbank five year public sector Pfandbrief in July 2009.

“The depth of demand was astonishing,” said Veillas.

Indeed, while the primary market can sometimes lost steam in the face of supply, the opposite occurred last week.

“Each day momentum seemed to increase in terms of the speed of bookbuilding and the size of the book,” said Veillas. “The first update, for example, was progressively earlier and stronger. So in this environment there was no concern about coming with the fourth 10 year tranche, because the level of demand was so high that it was strong enough for everyone.

“Investors very quickly understood that French covereds in this 10 year bucket is the precise segment to insist on if they want to lock in decent performance at the beginning of 2026.”

The four French 10 year trades were also priced at progressively tighter spreads: after Arkéa came at 56bp, CRH priced at 54bp, BPCE at 52bp and finally Caffil at 51bp.

“The syndicate had an expression for that,” said Veillas, “last mover advantage – when the market is so strong, it’s possible that coming last is an advantage, and we profited from that.”

At the time books were opened on Friday, Crédit Mutuel Arkéa’s new issue was seen at 52bp, mid, and both CRH’s and BPCE’s at 48bp, with Arkéa 1bp tighter than when Caffil’s mandate was announced the previous day and CRH 2bp tighter.

Caffil’s pricing was equivalent to 16bp through OATs, a record for the issuer.

Vincent Hoarau, global head of FIG syndicate at Crédit Agricole CIB, said the new issue played into the dynamics driving the covered bond market at the start of the year.

“The covered bond market is in full repricing mode,” he said. “More and more credit investors like the total return the asset class offers, while the track record of the segment in terms of resilience has been amazing throughout 2025. Unsecured senior spreads are trading at long time lows, playing positively for the asset class in terms of relative value. Meanwhile govies are no longer perceived as the risk-free benchmark.

“The liquidity-carry combo is going to continue to support spreads in secured funding,” added Hoarau. “The same for redemptions: in secured and unsecured preferred, they are 50% higher this month versus January 2025. So the compression mode is set to continue – particularly in a French segment that is still trading wide after a relatively difficult year.”

Some 180 investors participated in Caffil’s transaction, a record for the issuer as well as the overall Sfil group.

“One factor in the success of the deal was huge demand from the Nordics, with more than 20% of the book, and close to 30% for southern Europe,” said Ralf Berninger, head of investor relations and sustainability at Sfil. “That’s much higher than what we usually have from the Nordic region and southern Europe.”

The Nordics were allocated 23%, Spain and Portugal 20%, Germany and Austria 20%, the UK 8%, Italy 7%, Switzerland 5%, France 4%, the Benelux 4%, Ireland 4%, central Europe 3%, Asia 1%, and others 1%. Banks took 46%, investment managers 34%, insurance companies 12%, and central banks and official institutions 8%.

In spite of the huge level of oversubscription, Caffil did not increase its deal to the larger €1.25bn-€1.5bn sizes it has reached in recent years.

“We raised a decent amount of pre-funding in November and December, especially in longer maturities,” said Veillas, “so we were in a very comfortable position coming into 2026. We were therefore very happy with €1bn and no more when targeting 10 years.

“We also have the capacity later in the year to be reactive with taps of our outstanding bonds.”

Caffil intends to issue between €6bn and €8bn in covered bonds in its 2026 funding programme, with parent Sfil targeting €1bn-€3bn.

“This transaction marks a great start to the year,” said Olivier Eudes, head of ALM and financial markets. “With a total funding plan between €7bn and €9bn for 2026, we will continue to be active both in the SSA and in the covered bond market.”