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.

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.”

MünchenerHyp’s new issue comes after it in November sold a €500m five year green mortgage Pfandbrief.

“Our expectation was that the beginning of the year would be very busy,” said Schmid, head of strategic funding and ALM, “and as we are a very tight issuer, it’s always a challenge if there is a lot of traffic. So we decided to go out in November with the €500m no-grow five year so that we would have enough liquidity and could use a window later in January when most banks – but not us – are in blackout periods.”

That five year euro benchmark was the MünchenerHyp’s fifth of 2023, the longest of which was a seven year in June, with the issuer facing the same conditions that resulted in overall euro covered bond issuance being focused on the shorter end through 2023 and particularly its second half. The German bank’s last euro benchmark of 10 years or longer was in August 2022, while the last German 10 year was a €500m deal for LBBW in June 2023 at 19bp over mid-swaps, just before Bausparkasse Schwäbisch Hall postponed a planned 10 year Pfandbrief mid-bookbuilding.

“We really like it that 10 years are working at the moment, because we need the duration on the liability side, given that we have long dated assets. And over the last two years, we have not been in a position to print a 10 year because the market was not open for that, or at least only at prices that were not favourable.”

Indeed, although the 10 year and longer part of the euro curve was reopened by Crédit Agricole at the start of the year, followed by its compatriots, German issuers had been largely hesitant to follow suit, with only debutant Landesbank Saar doing so, in a €500m public sector Pfandbrief on 10 January at mid-swaps plus 46bp – 3bp inside where CRH had issued a €750m 10 year a week earlier, with Caffil issuing a €1bn 10 year just 1bp tighter a week later.

“We saw the French issuers coming with a premium of perhaps 10bp to our own levels,” said Schmid, “and no one knew how investors would react if a Pfandbrief were issued at much tighter levels.

“Where would the floor be for a 10 year bond for MünchenerHyp?”

It remained to be seen whether investors would expect a spread closer to the French issuers, or if the German issuer could crystallise a spread 10bp or more tighter. The latter looked likely after Rabobank of the Netherlands sold a €1.5bn 10 year at 37bp on Tuesday.

“We had been monitoring the market in recent weeks and then we saw the perfect window with Rabobank out there the day before.

“The levels are wide, for sure, but the entire curve has widened,” he added, “and the difference between five and 10 years is in a range that is acceptable for us. So we decided to go out with the 10 years now.”

After a mandate announcement on Tuesday, MünchenerHyp leads ABN Amro, DZ, LBBW, NatWest, NordLB and Santander opened books on Wednesday morning with guidance of the mid-swaps plus 41bp area for the €500m no-grow February 2024 green mortgage Pfandbrief, expected rated Aaa. After around three-quarters of an hour, they reported books above €1.5bn, excluding joint lead manager interest, and after close to two hours, they set the spread at 34bp on the back of books above €2.9bn, including €285m of JLM interest and pre-reconciliation. The book closed with more than €3.4bn of orders good at re-offer.

“The shadow book was in an unusually good condition the day before launch,” said Schmid, “within 10 minutes of opening books, we had more than €1bn of orders, and every 15 to 20 minutes it was crossing a new threshold. And even after we set the spread 7bp tighter, the book was still growing, which was very encouraging.”

The re-offer spread was 11bp inside where France’s La Banque Postale priced a €750m 10 year green covered bond on Friday.

“We are very happy with the pricing,” said Schmid. “Everyone now knows that 10 years is on fire and it could open the door for more German issuers to follow.”

Schmid said that although the green nature of the Pfandbrief did not affect pricing, it boosted the quality of the book, with around 20% of demand coming from dedicated green investors.

After last year’s five euro benchmarks – which were supplemented by taps – MünchenerHyp is likely to be less active in 2024, according to Schmid, with three or four including this week’s new issue. It is also eyeing its regular Swiss franc market and could return to sterling ahead of a December maturity if conditions are favourable, he added, but is unlikely to sell a public dollar Pfandbrief, instead meeting its needs in the currency via private placements.

Following a mandate announcement on Tuesday, Crédit Agricole Italia leads Crédit Agricole, IMI Intesa Sanpaolo, Natixis, RBI, Santander and UniCredit opened books with initial price thoughts of 105bp-110bp over mid-swaps for a €500m no-grow July 2033 green OBG, expected rating Aa3. After around an hour and 10 minutes, they reported books above €2bn, and after less than two hours they set the spread at 90bp on the back of more than €3.5bn of demand, with the final book reaching some €4.5bn, with almost 200 accounts involved and some 180 of them allocated bonds.

“Almost all covered bonds have been going well,” said a syndicate banker away from the leads, “but this was something else!”

“A covered bond with a triple-digit starting level seems to have been enough to set the world on fire.”

A syndicate banker at one of the leads said the initial price thoughts were just one factor in the deal’s reception.

“The combination of WNG [will not grow] and green for a covered bond usually acts like vitamin C,” he said. “You add the three-digit component, and it felt like a riot.

“Almost 200 lines in a covered bond order book – I don’t remember the last time it happened.”

He said the one-and-a-half day process and price discovery had been important factors in the deal’s success. A wide range of feedback received, with indications of interest anywhere between 85bp and 110bp, according to the lead banker.

Some market participants away from the leads put the new issue premium as low as zero, although there was no firm consensus. The lead banker put it in the context of the very low mid-single digits.

As well as secondary levels for OBGs and BTPs, senior preferred bonds of Crédit Agricole SA, rated Aa3/A+/A+ (Moody’s/S&P/Fitch) were included in pre-announcement comparables circulated by the leads, with the bank’s January 2033s and November 2034s quoted at 97bp and 93bp, mid, respectively. CAI January 2032 and March 33 OBGs were seen at 79bp and 81bp, and its January 2038s at 92bp.

“Given the particular spread complex in the asset class,” said the lead banker, “the deal attracted a lot of credit buyers that we normally see in the lower part of the capital structure.

“The participation of UK buyers was amazing and the quality of the order book stunning,” he added. “The allocation process was painful and we had to zero many momentum buyers in order to favour green funds and early-birds.”

December 2029 and May 2033 BTPs were seen at 82bp and 112bp, respectively, and the final pricing was put at some 20bp through the sovereign.

“International accounts play the relative value game across European names and jurisdictions and ignore BTP valuations, but domestic accounts don’t and struggle to buy inside the sovereign,” said the lead banker. “It was important to strike the right balance and to maximise the audience at the start.

“The deal solidifies the strong momentum overserved in the asset class since the beginning of the year,” he added. “Pricing 20bp inside the sovereign curve is not something you could take for granted in the post-QE era. The distortion is indeed still elevated in the secondary market and people still have to digest the heavy legacy left by the ECB and CBPP3.”

The new issue is the longest-dated Italian euro benchmark in almost two years, with CAI having sold a €1bn 10 and €500m 20 year tranches on 12 January 2022.

Sole-led by BMO Capital Markets, the three year fixed rate transaction was initially issued on Thursday for $550m, before being increased on Monday by $50m to $600m (€552m).

“Producing such a dollar issue so late in the year is not that obvious,” said pbb’s Michl, “and the market for covereds has not been easy, especially in euros. It was also a bit tricky to find a consensus on pricing among several leads.

“But we had the sense that there would be investor demand and BMO was prepared to lead the deal, so we took the bold decision to proceed, and it worked out perfectly.”

The new issue was priced at SOFR mid-swaps plus 100bp. Pbb’s last dollar benchmark was a $750m three year issue in February 2022, priced at 43bp, although the most recent dollar benchmark was a $1.75bn five year for National Australia Bank on 20 November at 98bp and the last three year a $1.5bn issue for Nationwide Building Society on 6 November at 75bp.

“It’s not as cheap as previously – no question,” said Michl, “but that is a reflection of what has happened over the last year in the euro market. In comparison to euros, it’s not much more expensive, maybe 10bp, 15bp more – and at the end of the year, a euro benchmark would not have been on the table, anyway.

“We are happy to have the currency, which is important for the dollar asset in the cover pool,” he added. “And the investors are more non-German, non-euro accounts, which is also an advantage of having a Canadian lead manager who is selling the product into pockets other than the usual euro Pfandbrief buyers.”

Michl said the additional $50m placed on Monday – ahead of the settlement date – reflected some investors not having been ready for the intraday execution.

The new dollar issue comes after pbb’s last euro benchmark, a €500m long four year on 18 September, proved challenging, being priced in the middle of guidance, at 27bp with a new issue premium of around 10bp, and with order books undisclosed. That followed a €500m long three year in early July that was more than twice subscribed at a similar NIP.

“Currently, it’s difficult to predict which deals will be successful and which won’t,” said Michl. “Our benchmark at the beginning of June went really well after some difficult transactions in May.

“Investor appetite and market sentiment is changing quickly. In many cases there were no technical mistakes like wrong maturity or pricing.”

Pbb’s name has nevertheless been in focus against a backdrop of negative commercial real estate headlines. S&P cut its issuer credit rating from BBB+ to BBB on 17 November after pbb announced higher provisions, with the rating agency having previously allowed the lender a one notch uplift over its peers on the back of lower provisioning. S&P does not rate pbb’s Pfandbriefe, which are rated Aa1 by Moody’s.

“The developments in the commercial real estate markets are a topic that we can’t avoid,” said Michl. “But we have focused on low leverage lending with average LTVs of approximately 50%, which lead to a pretty low LTV in the cover pool of approximately 30% and – with the comparably short maturity of the loans – to a very low market risk score.”

The dollar Pfandbrief is pre-funding for pbb’s 2024 funding programme and attention will now turn to the euro market in the first quarter. The primary market is widely expected to be busy, although Michl noted that various of its German peers have recently tapped the market, potentially relieving first quarter supply pressures for Pfandbriefe.

“There are two options,” he said. “Either you are there quite quickly, issuing in early January, or you rather wait – we have a late blackout period so can normally issue until the middle of February.

“Let’s see how the market opens and whether there’s a window.”

The new issue comes just over a month after Caisse Française de Financement Local (Caffil) sold a €750m long five year (January 2029) green covered bond. But its last social covered bond was in May 2022, a €500m 12 year.

Gonzague Veillas, head of funding and treasury at Caffil parent SFIL, said there were two rationales for new green and social bonds.

“Firstly, we want to upsize the share of ESG in our funding programme to show our dedication to this market,” he said. “So far this year we hadn’t done so much ESG – only one private placement in social format in the first semester – so we wanted to use our frameworks further before year-end.

“And secondly, we feel that ESG formats – which are very rare in the covered bond market – are good to use when the market context is quite challenging, which is true of the covered bond market at this time. We wanted to finish our 2023 funding programme with a very solid transaction and the social format here clearly makes a positive contribution to the execution of the transaction.”

Leads BBVA, BNP Paribas, Deutsche, LBBW and SG opened books on Monday morning with guidance of the mid-swaps plus 34bp area for the €500m no-grow March 2029 social obligations foncières, expected ratings Aaa/AA+/AAA (Moody’s, S&P, DBRS). After around an hour and a half, they reported books above €1bn, excluding joint lead manager interest, and after around two-and-a-half hours, they set the spread at 34bp on the back of books above €1.25bn, including €45m of JLM interest. The final book was above €1.34bn.

With its recent January 2029 green issue quoted at 31bp, mid, the new issue premium for the new March 2029 social issue was put at just 3bp.

“We are happy to terminate this year with a very successful social bond transaction,” said Veillas. “In this current market context where the new issue concessions are more in the context of 5bp-6bp, that is clearly quite a good outcome.

“We had a very good level of oversubscription, with strong participation of central banks/official institutions after banks, which is natural given the maturity.”

Banks were allocated 53%, central banks and official institutions 26%, asset managers 16%, and insurance companies 5%. Germany and Austria took 40%, France 18%, the Benelux 14%, the Nordics 8%, the Middle East and Africa 7%, Ireland 4%, Italy 3%, the UK 2%, Asia 2%, and others 2%.

The SFIL group established a new and broad green, social and sustainability framework in October 2022 – inaugurated with a green bond the following month – but this week’s issuance was off its more established social note framework dedicated to healthcare.

“This has been our fifth social bond benchmark financing the public hospital sector,” said Ralf Berninger, head of investor relations and sustainability at SFIL. “For next year, we also plan to start issuing social bonds to finance social investments by French local authorities, for example in the field of public education.”

Caffil plans to issue €4bn-€5.5bn of covered bonds next year, with ESG formats making an even greater contribution.

“This transaction completes our 2023 funding programme,” said Olivier Eudes, head of ALM and financial markets at SFIL. “Looking ahead, we plan to increase our green and social issuance, with a target of 25% of total issuance under green or social bond format for next year.”

The new euro benchmark supply is the first in the primary market since Slovakia’s Prima banka sold a €500m two year on Wednesday of last week (27 September).

Following a mandate announcement on Monday and marketing until Wednesday, leads ABN Amro, BayernLB, Natixis, Nordea, Scotiabank and UniCredit yesterday morning opened books for Compagnie de Financement Foncier’s €500m no-grow January 2029 inaugural social obligations foncières, expected ratings triple-A, with initial guidance of the mid-swaps plus 40bp area. After around three-quarters of an hour, the leads reported books above €1.5bn, excluding joint lead manager interest, and after around an hour and 40 minutes, they revised guidance to 34bp+/-2bp, will price in range, on the back off books above €3.25bn. The €500m deal was ultimately priced at 32bp on the back of a book above €3.1bn at final terms.

Syndicate bankers at and away from the leads welcomed the success of the fresh supply.

“It was a positive sign,” said a banker away from the leads. “They did a virtual roadshow and got enough investors interested in such a trade, and then they put a very nice premium on it, which was what the market expected – we calculated it at 12bp versus the secondary market at the start – and that really made it work.

“It’s an issuer that everyone is familiar with,” he added, “a good name, a good product, and it was €500m no-grow – all these boxes were ticked, so a very nice trade in the end.”

Another said the deal confirmed hopes that appropriate trades are still feasible in spite of the difficult backdrop.

“It’s a very good trade for the market, because the market has been unblocked,” he said. “It confirms that the liquidity and the market depth is there – but honestly we didn’t really doubt this.”

However, the syndicate banker felt the 40bp initial guidance was unnecessarily generous and ultimately played into another remarking wider of triple-A products, which had already been hit by a modest response to a EFSF trade on Wednesday.

“When you combine both, French, German, Nordics are again 2bp-4bp wider,” he said.

Other bankers nevertheless agreed with the approach taken by the leads.

“They had to be successful,” said one. “And when you’re structuring a new social programme like this, you don’t want to end up with a book that is shy of €600m or something like that. That premium was necessary to ensure success.”

South Korea’s Kookmin Bank had also announced its mandate on Monday, and yesterday morning leads BNP Paribas, Commerzbank, Crédit Agricole, HSBC, ING and SG opened books with guidance of the mid-swaps plus 58bp area for the €500m (KRW711bn) April 2027 covered bond, expected ratings triple-A. After a little over an hour and 50 minutes, they reported books in excess of €650m, excluding JLM interest, and after around two hours, they set the spread at 55bp on the back of books above €750m, with the final order book reported at more than €925m.

“Kookmin is a different animal and they did a good job,” said a banker away from the leads. “They set the pricing on the back of a €750m book and that is in line with market expectations – it’s not an issuer who normally has a €2bn book – and they were able to tighten a few basis points, so a nice and solid trade.”

A lead banker said the result was positive given the relatively limited investor base for South Korean product, and especially with Korea Housing Finance Corporation having sold a €1bn four year just a fortnight ago.

“And this year we are rethinking the definition of success,” he added.

Syndicate bankers said further supply could emerge next week after yesterday’s trades had demonstrated a window of opportunity, with several issuers monitoring the market.

ABN Amro, BayernLB, Natixis, Nordea, Scotiabank and UniCredit have the mandate for the €500m no-grow long five year issue for Compagnie de Financement Foncier (CFF), which was announced yesterday (Monday) morning. Investor virtual meetings were available from yesterday afternoon and a global investor call is scheduled for tomorrow (Wednesday) to market the programme, for which fellow BPCE group member Natixis is sole structuring advisor and roadshow coordinator.

The promotion of social housing organisations and public hospitals is the objective of CFF’s covered bond within BPCE’s broader framework, with the €819m of eligible loans as of end-July split €486m to social housing and €333m to healthcare. CFF’s history of helping low income populations is flagged in an investor presentation for the planned debut.

BPCE SFH issued a €750m 10 year covered bond in June dedicated to green buildings, while BPCE SA has issued €500m senior preferred and Tier 2 transactions this year with themes of sport economy and healthcare, and local economic development.

According to pre-announcement comparables circulated by the leads, CFF May 2029s issued in May this year were quoted at an I-spread of plus 30bp, mid, and September 2031s issued in March at plus 32bp, while older issues maturing from September 2028 to September 2030 were quoted at 24.5bp-26bp. BPCE March 2029s and October 2029s issued this year were seen at plus 28.5bp and 29.5bp, respectively.

In France, Caffil has issued obligations foncières supporting public hospitals, while Crédit Agricole and La Banque Postale have issued covered bonds dedicated to social housing. CFF is unique among French issuers in having both public assets and home loans in its cover pool.

Maureen Schuller, head of financials sector strategy at ING, noted that the new issue will lift 2023 social bond issuance from France, at €3bn, above green French covered bond issuance for the year of €2.75bn. Both are above 2022’s levels, while overall French supply is up more than €9bn, at €38.9bn.

Also yesterday morning, Kookmin Bank teed up a three to five year euro benchmark, mandating BNP Paribas, Commerzbank, Crédit Agricole, HSBC, ING and SG for the trade. According to pre-announcement comparables accompanying the mandate announcement, Kookmin July 2025s were quoted at mid-swaps plus 29bp, mid, its January 2026s at plus 35bp and October 2026s at 42bp.

The primary market was meanwhile quiet, with a German public holiday today (Tuesday), and the French and South Korean deals are expected in the second half of the week.

After bringing the summer break to a close in 2019-2022, Berlin Hyp (BHH) did so again with a €500m no-grow five year social mortgage Pfandbrief.

“In the last years, they all went extremely well,” said Winkler-Viti, head of funding and investor relations at Berlin Hyp, “as did this one.

“The big advantage on Wednesday was that we had the full attention of the market – there was no-one else – while in the first half of the year it was always extremely busy. It was hard to find any slots where you could get the full attention of investors – you always had to share it with somebody.”

After announcing the mandate on Tuesday, leads Commerzbank, HSBC, LBBW, SG and UniCredit opened books for the €500m no-grow August 2028 mortgage Pfandbrief, expected rating Aaa, with guidance of the mid-swaps plus 10bp area. After around 50 minutes, they reported books above €1bn, excluding joint lead manager interest, and after around an hour and 40 minutes, guidance was revised to plus 7bp+/-1bp, will price in range, on the back of books above €1.4bn. The spread was ultimately set at 6bp on the back of books above €1.8bn, excluding JLM interest and pre-reconciliation, with the final book around €1.6bn and including 88 investors.

“The process was super-smooth,” said Winkler Viti. “We were able to generate a very solid order book in relatively short order.”

The only complicating factor, according to syndicate bankers, had been calculating fair value. According to pre-announcement comparables circulated by the leads, Berlin Hyp 3.375% March 2028s were quoted at minus 1bp, mid, green 0.01% July 2028s at plus 2.5bp, and 0.625% February 2029s at plus 4.5bp. LBBW green 3.25% September 2027s were meanwhile seen at minus 1.5bp.

“It was indeed a little bit complicated saying where fair value was,” said Winkler-Viti, “because we have quite a few bonds outstanding with maturities in 2028-2029. After having calculated it at plus 2bp, the new issue premium was 4bp, which is a solid outcome.

“It allows some performance in the secondary market, and as the order book was very strong and the bond is well placed, I’m sure that it will perform.”

German investors were allocated 54% of the issue, the Benelux 17%, the Nordics 11%, the UK an Ireland 10%, France 3%, Switzerland 3%, Austria 1%, and southern Europe 1%. Banks and financial services took 41%, asset managers and fund managers 40%, insurance companies and pension funds 8%, governments and agencies 6%, and others 5%. Savings banks and affiliated companies accounted for 21% of the paper.

The social bond is Berlin Hyp’s fifth euro benchmark covered bond of 2023, for an aggregate €3bn. Only one of these was not a green or social bond, meaning that ESG trades makes up a higher proportion of the issuer’s deals than ever before.

“During execution and also just after we announced the deal, we received a lot of feedback from investors saying that they were more interested in this issue because it has a social label,” said Winkler-Viti. “I found that very positive, because while there was additional interest in green bonds, including green covered bonds, I previously had the feeling that social bonds were not yet as popular.

“That seems to have changed, with investors now appreciating the social sector almost equally with green bonds.”

After inaugurating its social bond framework in May 2022 with a €750m issue, and including a €500m three year social tranche in a dual-tranche trade in January alongside a €500mn green seven year, Berlin Hyp has now sold €1.75bn of social bonds. The eligible asset portfolio has meanwhile increased from €2.2bn to more than €2.8bn.

“So even without any further growth, there is potential for more,” said Winker-Viti.

However, having issued the five benchmarks for €3bn this year, Berlin Hyp does not expect to sell another benchmark this year.

The deal was announced into Asia at around 11am Hong Kong time with initial price thoughts of the mid-swaps plus 97bp area for the May 2028 Australian covered bond, expected rating Aaa. By New York open, demand totalled some $2bn, according to a banker at one of the leads.

“That put us in a position of strength,” he said, “and we moved to 95bp given this momentum.”

Anchor orders were complemented by granular demand, he added, and the book peaked at around $3bn. The $1.75bn (€1.62bn, A$2.63bn) deal was ultimately priced at 92bp.

“It went super-well,” said a lead syndicate banker. “It’s probably as good a dollar covered bond as I’ve worked on in 10 years or so in terms of the breadth of investor audience and number of accounts involved, everything from central banks and bank treasuries through Asia and Europe and also some reasonable US involvement.”

The UK and Ireland were allocated 36% of the paper, Asia 30%, the Americas 20%, EMEA 9% and Australia 3%. Banks and financial institutions took 59%, central banks and official institutions 30%, and asset managers and insurers 11%.

HSBC, Lloyds, RBC, TD and Westpac were active bookrunners, and DBS a passive bookrunner.

The lack of recent dollar supply contributed to the relatively large 5bp move from IPTs to final pricing, according to the lead bankers.

“There was a reasonable amount of price discovery through the process,” said the syndicate banker, “hence, why we moved from 97bp to 92bp, which is quite a lot for a covered bond from a mainstay jurisdiction, but reflective of the fact that secondary instruments are quite stale, while this this was an opportunity to buy this asset class in some size.

“That did leads to a bit of a re-racking of prices.”

The leads said the final pricing was appropriate, noting that a smaller deal might have been possible at an even tighter spread. The $1.75bn size was meanwhile the top end of what Westpac had been seeking.

They put the pricing roughly flat to euros, noting that euros’ pricing advantage had eased this year, with both the ECB’s winding down of CBPP3 and a move in cross-currency basis swaps in favour of dollars contributing to this.

“There’s been an interesting sort of shifting of tectonic plates in this regard,” said the syndicate banker. “There’s a range of opinions around just where a five year Aussie would price in euros, but Westpac didn’t pay up relative to euros.

“So dollars is once again an appealing choice relative to other markets, and for those issuers who want to diversify and retain a strategic foothold in the dollar market, that’s helpful – as well as to alleviate some supply pressure from the euro market.”

Further supply could be forthcoming after Westpac’s success, suggested bankers, particularly with Canadian banks coming out of blackouts next week.