Canadian Imperial Bank of Commerce leads CIBC, DZ, HSBC, Natixis and SG opened books this morning with initial guidance of the mid-swaps plus 40bp area for the October 2029 euro benchmark-sized issue, expected ratings Aaa/AAA (Moody’s/Fitch). They ultimately priced a €1.25bn (C$1.9bn) deal at 35bp, with demand peaking above €2bn and the final book some €1.8bn, including €50m of joint lead manager interest.

Syndicate bankers at the leads put the new issue premium at around 2bp, with fair value seen at 33bp, flat to where the last Canadian five year five year benchmark was trading, a €1bn Desjardins deal issued in May. CIBC’s re-offer spread was flat to where the €2.5bn five year tranche of TD’s record €5.5bn March issuance was trading.

“CIBC hasn’t been seen in quite a while,” said a lead banker. “Meanwhile, we’ve seen tonnes of TD and a little bit of Desjardins. Because TD was supersized and its curve is super-supplied, we felt that fair value for CIBC should be at least a couple of basis points inside.”

CIBC’s last euro benchmark was a €1.5bn four year issue in March 2023.

Another lead banker said overall demand and individual tickets surprised to the upside a little, allowing the issuer to take the €1.25bn size.

“CIBC would have been happy with €1bn,” he added, “but if there wasn’t a basis point cost for an extra €250m, then fine.

“So €1.25bn at a 2bp premium – investors are happy and the issuer is happy, with very smooth execution.”

The deal hit the market early for a Monday morning and the lead bankers said this was done because of rumours of a heavy pipeline and CIBC’s intent to move ahead of any such supply.

“It didn’t feel like there was a huge amount of upside in waiting,” said one of the lead bankers. “The market’s been OK, it’s been accessible – yes, we’ve been seeing positive concessions, but if you’re OK with that, and you don’t want to run the risk of the market moving away from you, then go ahead.”

Korea Housing Finance Corporation’s social bond mandate had been announced on Wednesday, with a maturity of either long three or five years flagged. After a roadshow ending on Thursday, the leads on Friday announced that the South Korean issuer would be focusing on a 3.75 year maturity, with launch expected early this week.

They circulated comparables including KHFC March 2029s at 40, mid, as well as recent non-Eurozone issuance including DBS March 2028s at 24bp, Maybank June 2027s at 22bp, OCBC June 2027s at 20bp, Standard Chartered Singapore May 2024s at 25bp, and TD September 2027s at 25bp.

Leads Crédit Agricole, HSBC, ING, Natixis and SG opened books this morning with initial price thoughts of the mid-swaps plus 42bp area for a July 2028 euro benchmark-sized transaction, expected ratings Aaa/AAA (Moody’s/S&P). After close to around three and a half hours, the leads reported books above €690m, excluding JLM interest, and set the spread at 42bp. Around two hours and 20 minutes later, they set the size at €650m (KRW966bn) on the back of a book above €850m, excluding JLM interest, and the final book good at re-offer was later put at above €810m, excluding JLM interest.

A lead banker noted that KHFC’s investor base and line availability is much more constrained than, for example, CIBC’s, and that, in conjunction with this, spread tightening for its issuance is from the outset not expected to be as great as for more widely taken names. However, he acknowledged that a tighter spread of 40bp had been hoped for.

Mandates for Coventry Building Society and Deutsche Kreditbank hit screens today, while at least two other deals are anticipated in the near future.

Coventry is expected with a €500m no-grow five year issue, having mandated ABN Amro, BBVA, HSBC, NordLB and Santander. The leads circulated pre-announcement comparables including Santander UK March 2029s at 33bp, mid, TD February 2029s at 34bp, and Desjardins May 2029s at 33bp.

Deutsche Kreditbank has mandated a €500m no-grow 10 year social housing covered bond. BayernLB, Commerzbank, NordLB, SG, UBS and UniCredit have the mandate for the mortgage Pfandbrief.

DKB’s outstanding January 2035 social housing issue was at 35bp, mid, pre-announcement, according to the leads, while MünchenerHyp green February 2034s were at 27bp and a variety of other February and March 2034 Pfandbriefe at 30bp-33bp.

“There’s also another core European name rumoured in 10 years,” said a syndicate banker, “and some supply in the middle of the curve, but I don’t expect the issuance that is being discussed to oversupply the market.

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.

BNP Paribas, Citigroup, Crédit Agricole, ING, LBBW and Societe Generale have the mandate for the Reg S sustainability covered bond, for which investor calls were held today.

As is typical for South Korean covered bond issuers, Kookmin is understood to have had limited room for manoeuvre in the timing of its new issue, leaving it and its leads with the challenge of navigating difficult primary market conditions.

The only euro benchmark since last Wednesday (8 June), a €500m long four year Pfandbrief for Aareal yesterday (Tuesday), had limited oversubscription and was priced in the middle of initial guidance with a new issue premium of as much as 10bp. With the primary market empty this morning, market participants had already been bracing for the Federal Reserve’s latest interest rate rise today, when news of an emergency European Central Bank meeting emerged this morning.

In the wake of widening of peripheral government bond spreads, the ECB concluded its meeting by stressing that it will apply flexibility in PEPP reinvestments and accelerate the completion of an anti-fragmentation instrument for consideration by the governing council. The BTP-Bund spread had narrowed sharply on news of the meeting and remained tighter in the wake of the announcement.

With an uncertain FOMC decision due this evening, parts of the EU on holiday tomorrow (Thursday), and a Friday mandate announcement leaving little time for preparation, Kookmin’s plans were announced this morning against the better backdrop, with a view to launch on Monday, although a syndicate banker noted the challenges facing any new issue.

“Fingers crossed that Monday is a good day and they can pull the trigger, build the books and price it,” he said. “If not, it won’t be the first or the last one this year to have announced a deal, pre-marketed and not execute – we are back to the old times where there is a big element of gut feeling in any decision you are taking.

“I don’t see the ECB as a game-changer,” the banker added. “The big question is what happens overnight, whether or not we have a 75bp hike, and how the market reacts to that.”

According to comparables circulated by the leads today, Kookmin July 2025s were quoted at mid-swaps plus 14bp, mid, and October 2026s at 17bp.

Another syndicate banker said the short maturity should help execution, but pricing considerations will be paramount.

“I expect them to come with something clearly and definitely consensual versus what people could expect from a name like Kookmin in current market condition,” he said.

A syndicate banker involved in one of today’s deals that a lack of disruptive headlines over the weekend and a stable opening for equities and rates was sufficient for issuers to move ahead, even if the primary market was as busy as anticipated.

“At the moment, we just want a sort of stable open, and a 4 or 5 out of 10 day is good enough,” she said.

Syndicate bankers said the hawkish outcome of the latest ECB governing council meeting on Thursday had had little direct impact on the covered bond market – even if the end of APP was brought forward – but had underlined the rates outlook, noting that 10 year swap rates were above 1% today.

Axa Home Loan SFH leads Crédit Agricole, HSBC, NordLB, SG and UniCredit went out with guidance of the mid-swaps plus 9bp area for the €500m no-grow October 2026 issue, expected ratings triple-A. Demand peaked above €1.5bn and the deal was priced at 5bp, with the final book above €1.4bn, excluding joint lead manager interest.

“The best trade today was definitely Axa,” said a syndicate banker away from the leads. “It’s short, from a core name, it only paid 4bp-5bp, and in terms of new issue concession, book momentum and spread tightening, it was quite standard.

“It very much looked like a trade that could have been priced two to three weeks ago.”

ANZ New Zealand and Korea Housing Finance Corporation (KHFC) both tightened their pricing 2bp and were deemed to have paid 4bp-6bp of new issue premium, with the New Zealander pricing its €750m five year deal at 15bp on the back of some €950m of orders, and the Korean its €600m three year at 18bp on the back of a book above €700m.

“The re-offer of 15bp is not completely what we hoped for,” said a syndicate banker at one of ANZ NZ’s leads, “but getting €750m was more important than tightening by an extra basis point.

“It’s modest days.”

Another lead banker said the €750m size was the top end of the €500m-€750m range the issuer had in mind, and that although conditions are difficult, the market clearly remains open.

“Liquidity and appetite in the covered bond space is pretty good,” he said. “Anywhere up to five or seven years is going well.

“Investors are getting very attractive spreads in sub-five year maturities versus what they are used to over the past couple of years, while they’re getting a positive spread and positive yield. And especially versus an SSA like KfW at minus 30bp – that’s a nice pick-up.”

HSBC SFH (France) is expected tomorrow (Tuesday) with a five year euro benchmark via Crédit Agricole, DZ, Helaba, HSBC, Goldman Sachs, Natixis and UniCredit, following a mandate announcement today.

ANZ NZ leads ANZ, BNP Paribas, Deutsche and DZ opened books with guidance of the mid-swaps plus 17bp area for the March 2027 euro benchmark, expected ratings triple-A. After around two hours, they reported books above €750m, excluding JLM interest, and after close to two hours the spread was set at 15bp on the back of orders above €800m. The size was ultimately set at €750m on the back of €950m of demand, excluding JLM interest.

National Australia Bank priced a €1.5bn five year at 12bp over mid-swaps on Wednesday and the lead banker said the success of that trade pointed to ANZ NZ’s deal working, noting that New Zealand issuers typically trade 3bp-5bp back of the Australian parents.

KHFC leads Citi, Crédit Agricole, ING, SG and Standard Chartered opened books with guidance of the mid-swaps plus 20bp area for the March 2025 euro benchmark social covered bond, expected rating triple-A. After around three hours and 20 minutes, they set the spread at 18bp on the back of more than €660m of demand, including €30m of JLM interest. The deal was ultimately sized at €600m on the back of books above €720m, pre-reconciliation, and the final order book was above €700m.

According to pre-announcement comparables circulated by the leads, KHFC February 2025s and July 2025s were quoted at 12bp, mid, its June 2026s at 14bp, and its October 2028s at 19bp (all social bonds).

A €500m no-grow five year deal for Slovakia’s Vseobecna uverova banka (VUB) proved the most challenging of the day.

Leads Danske, DZ, Erste, IMI-Intesa Sanpaolo and UniCredit went out with guidance of the mid-swaps plus 18bp area for the €500m no-grow March 2027 euro benchmark, expected rating Aa1. After around an hour and 50 minutes, they reported books above €500m, excluding JLM interest. The final spread was set at 18bp on the back of books above €600m, including €50m of JLM interest.

A lead banker said the new issue suffered from the generally difficult conditions, with only the illiquidity of Slovakian paper making execution more challenging. He cited Slovenska sporitelna June 2026s at around 5.5bp and VUB March 2026s and June 2029s at around 8bp, but put fair value for a new issue at around 9bp, implying a new issue premium of around 9bp.

Other bankers concurred, but attributed at least part of VUB’s outcome to Slovakia neighbouring Ukraine.

“Investors do not like CEE risk at the moment,” said one, suggesting VUB’s outcome would deter other issuers from the region.

The banker said some investors are also more generally nervous about the potential direction of spreads, even if they do not expect the war in Ukraine to spill over.

“Plus 18bp seems OK, but it’s still a risk,” he said. “A week or two from now, it may be plus 40bp or plus 50bp – nobody really knows, but if we remember back to March, April 2020 when the markets dried out, you couldn’t place bonds at all at these tighter levels. Some accounts have reflected that to us in recent days.

“I guess the issuer must be pretty pleased to have got the deal away in some form given we don’t know what’s going to come up,” he added. “At the end of the day, they understood it is the price investors are requiring today.”

After a mandate announcement on Friday and following investor calls this week, Korea Housing Finance Corporation (KHFC) leads BNP Paribas, HSBC, ING, Societe Generale and Standard Chartered opened books this morning with initial guidance of the mid-swaps plus 19bp area for the October 2028 social covered bond, expected rating triple-A. After about two hours and 45 minutes, they reported books above €500m, and after three hours and 45 minutes, they set the spread at plus 19bp with the book volume remaining the same. The deal was ultimately sized at €550m (KRW755m) on the back of demand above €630m, including €75m in joint lead manager interest.

Bankers away from the leads said the guidance could have contributed to the lack of momentum behind the trade.

“It didn’t seem particularly off,” said one. “Maybe a bit on the aggressive side, but I’m a bit surprised with the pushback they had.

“They have been quite active the past few years,” he added, “and maybe you reach a moment where investors don’t necessarily have line availability.”

KHFC last tapped the market four months ago, with a successful €1bn five year, after raising €1.5bn in two euro benchmarks in 2020. Compatriot Kookmin, meanwhile, sold a €500m five year debut green covered bond last Wednesday (13 October) at 14bp over mid-swaps.

Syndicate bankers at the leads acknowledged that the pricing approach and line availability, also in relation to South Korea in general, likely contributed to the outcome.

“The fact that they are the last one in the queue after Kookmin and Kexim is probably a factor,” said one.

Agency Kexim sold a €850m three year debut green bond, rated Aa2/AA/AA-, at 15bp on Monday of last week (11 October).

“We’re also starting to see investors saying this is too tight, or that you wanted to go too tight with that IPT,” added the lead banker, “and with recent transactions moving 5bp, maybe people interpreted that they want to move that far, which probably didn’t help the momentum either.

“We were a bit disappointed.”

Another lead banker echoed this.

“Spreads have come a heck of a long way in euros for these newer regions,” he said. “Their existing five year was at 15bp, mid, so investors felt starting 4bp back of that was a little bit tight. The thinking had been that they didn’t want to start wider and then get held there.

“But they took €550m out of the market after €1bn earlier this year, and extended by two years paying only 1bp more,” he added, “so in terms of overall funding they’re taking out of the market, it’s very good – albeit it was a bit clunky getting stuck at initial guidance.”

The issuer opted for €550m rather than the standard €500m to benefit from the funding level to a greater extent, said the lead banker, while the quality and size of the book supported it, with accounts keen to be allocated.

Societe Generale SFH hit the market this morning, with leads BayernLB, Commerzbank, DZ, IMI-Intesa Sanpaolo, RBI, Societe Generale and UniCredit going out with initial guidance of the mid-swaps plus 4bp area for the €750m no-grow October 2029 issue, expected rating triple-A. After an hour and five minutes, they reported books above €1.25bn, excluding joint lead manager interest. After two hours and 30 minutes, they revised guidance to mid-swaps flat plus or minus 1bp, will price in range, on the back of books over €2.25bn, excluding JLM interest. The spread was ultimately fixed at minus 1bp, with books above €1.8bn good at revised guidance, excluding JLM interest. Final books at re-offer were above €1.4bn, including €60m in JLM interest.

A syndicate banker away from the leads called the deal an “absolute blinder”, although another suggested a tighter starting point could have been taken, such as 3bp over.

“But at the end of the day, it’s the same result,” he said, “and probably looks a bit nicer with a bigger order book.”

The pricing was seen roughly flat to fair value. According to pre-announcement comparables circulated by the leads, SG SFH January 2028s were at minus 1.5bp, mid, July 2029s at minus 1bp, and February 2030s at minus 0.5bp.

“It was apparent from the updates that there was some sensitivity involved,” said a syndicate banker at one of the leads. “But if you’re almost two times done on a super-aggressive level then you can’t have done a lot wrong.”

The deal is SG SFH’s second euro benchmark this year, after a €750m 10 year in January, and it only issued once in 2020, also in January, noted the lead banker.

“SG has become a pretty scarce issuer in this business,” he said, “which of course gives them some leverage when it comes to pursuing ambitious pricing targets, and today’s was definitely ambitiously priced.”

Banca Carige could hit the market tomorrow (Thursday), having already mandated banks for its first benchmark OBG in six years. Despite the Italian lender being at the riskier end of the market, with triple-B covered bond ratings, a syndicate banker away from the mandate said he expected SG’s outcome rather than KHFC’s to provide a better guide to its likely fate.

“It feels like the ECB-eligible part of the market is kind of really in a sweet-spot,” he said, “because you’ve got rates coming up, which is bringing in a few more of the total return buyers who were locked out by negative yields before. And at the same time, you’ve still got that support of the central bank behind you, which gives you a lot of power in execution and will support the Italian trade.

“And Italian covereds have been super-quiet for the last couple of years, so I think structurally there’s still a lot of money to go in there.”

Bausparkasse Schwäbisch Hall is also due, with a €500m no-grow 10 year mortgage Pfandbrief via Barclays, DZ, Helaba, Natixis and RBI, following a mandate announcement today. According to pre-announcement comparables circulated by the leads, its October 2030s were at minus 2.5bp, mid, and its April 2033s at minus 2bp.

Year-to-date euro benchmark issuance passed the threshold as six euro benchmarks totalling €3.75bn hit the market last week with deals ranging from triple-A to single-A, Pfandbriefe to a ship covered bond, and encompassing dual-tranches and ultra-long maturities, as well as Asian paper with “juicy” spreads, as noted by Rabobank analysts.

“You name it, last week had it,” they said. “The few deals that did get done were (mostly) met with strong investor interest, with conditions improving as the week wore on.”

A syndicate banker said that although conditions remain constructive, this week could be quieter, with many potential issuers in blackouts. Four mandates are nevertheless already pending.

DBS is planning a five year euro benchmark, with BNP Paribas, DBS, LBBW, Societe Generale and UBS as leads, which is expected tomorrow after a mandate announcement today (Monday).

According to pre-announcement comparables circulated by the leads, United Overseas Bank (UOB) January 2025s were quoted at 1.7bp, mid, and its December 2027s at 6.9bp.

The Singaporean issuer’s last euro outing was four years ago – a €500m seven year in November 2017. It sold a $1.25bn (€1.08bn) three year benchmark in November 2018 that matures next month. The last Singapore euro benchmark was a €750m (SGD1.17bn) eight year for UOB in May.

DZ Hyp is planning a five year mortgage Pfandbrief, with Dekabank, DZ, Erste, ING, Scotiabank and SG as leads, according to a mandate announcement today.

According to a lead syndicate banker, the deal can be expected tomorrow and will mark the fourth and final benchmark this year for the biggest German issuer. Its last was a €750m long nine year in July.

According to pre-announcement comparables circulated by the leads, DZ Hyp March 2026s were quoted at minus 4.5bp, mid, its August 2026s at minus 3.5bp, September 2026s at minus 4bp, and January 2027s at minus 4.5bp.

Banca Carige is planning a first benchmark OBG in six years and has mandated Commerzbank, Credit Suisse, IMI-Intesa Sanpaolo, NatWest and UBS for a seven year transaction after investor calls starting today. To be issued off Carige’s programme 1, the soft bullet covered bonds have expected ratings of Baa3/BBB.

The Italian’s last euro benchmark was a €500m five year priced at 100bp over mid-swaps in October 2015.

The troubled lender last Wednesday appointed Boston Consulting Group as an advisor to assist in developing its strategy, including a possible merger.

A seven year euro benchmark for Korea Housing Finance Corporation (KHFC) in social format is meanwhile in the pipeline for launch after investor calls starting today.

Following investor calls, Kookmin Bank leads Credit Suisse, Citi, ING, JP Morgan and BNP Paribas went out this morning with initial guidance of the mid-swaps plus 18bp area for the €500m no-grow October 2026 green issue, rated triple-A. After around two hours, they reported books above €1.1bn, including €110m in JLM interest. After about three hours, guidance was revised to the 15bp area, on the back of books above €1.2bn, including the JLM interest. The spread was ultimately fixed at plus 14bp, with the final order book over €1bn.

A syndicate banker away from the leads said that being two times covered and paying no new issue premium, the result was “good news” for Kookmin.

“We are still talking about an issuer that is fairly new,” he said. “Every new trade is helping them reprice their secondaries tighter.

“It was the kind of trade that was bound to go well,” he added, “because it’s a name that offers some spread – it’s not often you get a positive yield on a five year.”

Syndicate bankers at and away from the leads saw fair value at 14bp, with a lead banker seeing their July 2025s at 13bp. He further highlighted that Kookmin’s pricing was a touch inside Korea Housing Finance Corp (KHFC) June 2026s, which he noted is a €1bn trade.

“We are super-happy with execution and the engagement Kookmin enjoyed on the roadshow for its inaugural green bond,” he added.

Final distribution figures were not yet available, but he said there was decent take-up from green/SRI accounts, and another lead banker noted that the trade attracted new names to what is only Kookmin’s second euro benchmark covered bond, after a €500m five year sustainability issue in July 2020.

“The issuer got a more diversified book than last time,” she said. “Coming frequently to the market helps them as investors want to eventually start opening lines on this name, and that paid off today.”

The new issue is the first pure green covered bond from Korea, but follows a series of social and sustainability covered bonds from the country’s issuers.

Following a mandate announcement on Monday, Wüstenrot Bausparkasse leads Commerzbank, DZ, Helaba, LBBW and UniCredit opened books this morning with initial guidance of the mid-swaps plus 4bp area for the €500m no-grow October 2029 mortgage Pfandbrief, expected rating triple-A. After an hour and 10 minutes, the leads reported books above €1bn, excluding joint lead manager interest. After an hour and 45 minutes, guidance was revised to mid-swaps flat +/-1bp, will price in range, on the back of books above €1.35bn, excluding JLM interest. After two hours, the spread was fixed at minus 1bp, with books above €1.3bn, excluding JLM interest, good at guidance, pre-reconciliation. The final order book was above €1.14bn, excluding JLM interest.

A lead syndicate banker said the trade went very well, noting that no new issue concession was paid. The deal is only Wüstenrot Bausparkasse’s second euro benchmark, after a €500m seven year debut exactly a year ago, which was upsized from a planned sub-benchmark size on the back of strong demand.

The new issue comes after Berlin Hyp on Monday priced a €1bn long eight year at 2bp through mid-swaps, and the lead banker said Wüstenrot had been helped in limiting the differential versus its compatriot to 1bp by the €500m no-grow size, whereas on a like-for-like basis the differential might be 2bp.

A syndicate banker away from the leads said that the positive, 0.129% yield and 0.125% coupon is incrementally helping core supply in the seven to eight year part of the curve.

“It’s not a game-changer,” he said, “but you do get some extra investor here or there now that we are more or less talking about a positive yield in seven years and longer. I’m not saying an eighth coupon is a lot, but given where yield have been, some accounts are happier to participate.”

Compagnie de Financement Foncier (CFF) today generated a larger final order book for a 20 year part of a €1.5bn dual-tranche issue than a six year, with the rates environment cited as a factor in the outcome. A syndicate banker away from the leads noted that the long-dated tranche yielded some 0.60%, versus 0.419% paid by ABN Amro on a €1.5bn 20 year on 10 September, for example.

“This is clearly where we see demand at the moment, given the bump in rates,” he added.

Following IPTs of 3bp over mid-swaps and 10bp, respectively, for €500m-€750m six and 20 year tranches, the combined order book reached more than €3.1bn, and the two tranches were ultimately priced at minus 1bp and plus 5bp, respectively, with final books of €1.1bn and €1.35bn. Both tranches were seen roughly flat to fair value.

BBVA, Commerzbank, DekaBank, Deutsche, IMI-Intesa Sanpaolo, Natixis, NordLB and Swedbank were leads.

Korea Housing Finance Corporation (KHFC) entered the market after announcing the mandate for its five year Reg S/144A social covered bond last Thursday (17 June), with investor calls held ahead of launch today.

This morning, leads BNP Paribas, HSBC, ING, SG and Standard Chartered went out with initial guidance of the mid-swaps plus 21bp area for the euro benchmark-sized June 2026 issue, rated Aa2/AA/AA- by Moody’s, S&P and Fitch. After an hour and forty minutes, they reported books above €1bn, excluding JLM interest, and after around two and three quarter hours revised guidance to 19bp+/-1bp, will price in range, on the back of more than €1.2bn of demand. The spread was ultimately set at 18bp and the size at €1bn on the back of books above €1.3bn.

“We had a very high quality order book, so it was easy to print €1bn,” said a banker at one of the leads.

Quoting KHFC July 2025s at 15bp, bid, and putting the curve extension to June 2026 at around 1bp, he put the new issue premium at 2bp. He said the outcome was helped by the general lack of covered bond supply and in particular undersupply in the five year part of the curve – the last five year euro benchmark was a €500m trade for Fédération des caisses Desjardins du Québec on 30 March and only a handful of five year trades have hit the market this year.

“And obviously KHFC does pay a bit more than ECB-eligible issuance,” he added.

The issuer’s decision to announce the mandate several days in advance to allow time for investor work also contributed to the demand, according to the lead banker.

“We had really positive feedback,” he said.

Caisse Française de Financement Local (Caffil) leads BayernLB, BNP Paribas, Citi, SG and UniCredit announced the French trade this morning and went out with guidance of the mid-swaps plus 6bp area for the euro benchmark-sized June 2031 public sector obligations foncières, rated Aaa/AA+/AAA by Moody’s, S&P and DBRS. After around two hours, they reported books above €1.35bn, including €150m joint lead manager interest, then 20 minutes later fixed the spread at 4bp and the size at €1bn on the back of orders above €1.4bn, including €150m JLM interest. The final order book was above €1.2bn, including unchanged JLM interest.

“The 2bp move and sizing it at €1bn versus the €1.4bn book seemed prudent,” said a syndicate banker away from the leads. “It looked like a bit of an uphill struggle, but a solid result in the end.”

According to pre-announcement comparables circulated by the leads, Caffil March 2031s were trading at 1.9bp, mid, and its December 2031s at 1.6bp. The €1.5bn March 2031s issue was launched in January at 3bp, flat to fair value, on the back of some €3.3bn of orders.

Oberbank is set to launch the first Austrian green covered bond tomorrow, subject to market conditions, a €250m deal announced last Thursday as a seven to 10 year trade. Investor calls finished yesterday and, according to an update this morning, investors were leaning towards the 10 year maturity.

The Austrian bank has mandated Crédit Agricole, DekaBank, Erste and RBI for investor calls on Monday and Tuesday, with the €250m no-grow deal expected to follow, subject to market conditions.

Oberbank’s green bond framework is to finance green mortgages against residential buildings in Germany and Austria, with its criteria based on the EU Taxonomy: existing buildings must have class A energy performance certificates (EPCs) or otherwise be in the 15% most energy efficient buildings in the country/region; new buildings must beat the relevant nearly-zero energy buildings (NZEB) threshold by 10%; and renovations must qualify as major renovations or reduce primary energy demand by at least 30%. Alongside EPCs and in line with other green bond frameworks, Oberbank’s methodology uses year of construction combined with regional building codes to determine eligibility for existing buildings.

The framework allows for the issuance of senior preferred and non-preferred debt as well as covered bonds. Erste is sole green structuring advisor.

ISS ESG, which ranks the issuer 32nd out of 276 companies in its sector, provided the second party opinion.

“ISS ESG finds that the use of proceeds category financed through this bond is consistent with the issuer’s sustainability strategy and material ESG topics for the issuer’s industry,” it said.

Oberbank has been active in the public markets with sub-benchmark covered bond issuance since May 2018, when it sold a €300m 15 year debut, followed by a €250m 10 year in January 2020.

Its new issue will be the first green covered bond from Austria, with previous ESG-themed issuance from the country having only been in social format – Hypo Tirol sold the first benchmark Austrian social covered bond in March, a €500m 10 year mortgage Pfandbrief, after Kommunalkredit opened sustainable covered bond issuance for the country in 2017 with a sub-benchmark public sector-backed social covered bond.

Korea Housing Finance Corporation (KHFC) is meanwhile holding investor calls on Monday ahead of the launch of a Reg S/144A five year social covered bond, subject to market conditions. BNP Paribas, HSBC, ING, SG and Standard Chartered have been mandated as leads.

Its last covered bond benchmark, also a social bond, was a €500m (KRW676bn) five year in June 2020. Since then, compatriot KEB Hana has entered the covered bond market with a €500m five year social debut in January, while Kookmin Bank in July 2020 debuted in euros with its first social covered bond.

Euro benchmark covered bond issuance in sustainable formats last week surpassed 2020’s volumes, with the launch of a €500m 10 year green bond debut from Eika Boligkreditt, according to Joost Beaumont, senior fixed income strategist at ABN Amro. It now stands at €7bn, or 16.7% of total issuance, with green euro benchmarks comprising €5.25bn of this and 12.5% of total supply.

“We expect the market to grow steadily, especially as the EU Taxonomy has embraced the ‘top 15%’ criteria for energy-efficient buildings, for which mortgages can be financed with green covered bonds,” said Beaumont.

Issuance of sustainable euro benchmark covered bonds (EUR bn)

Source: ABN Amro, Bloomberg

The bank follows compatriots Korea Housing Finance Corporation (KHFC) and Kookmin into the international covered bond market, after having established a $5bn global programme last month. The programme allows for issuance in various currencies, including euros and US dollars.

“KEB Hana has always aimed to diversify its funding sources,” said a spokesperson for the bank, “and to reduce funding costs as a counter-measure to the heightened market volatility last year. With plenty of high quality Korean won mortgage loan assets in hand, KEB Hana considered covered bonds as a key option that could help reduce its cost of funding.

“KEB Hana had been issuing in US dollars in the international markets as KEB Hana’s foreign currency needs were concentrated on US dollars,” they added. “However, KEB Hana wanted to achieve diversification in terms of funding source and investor base, which is possible with the new covered bond programme.”

The issuer chose to debut with a social bond, a format that KHFC and Kookmin have also used.

“KEB Hana has abundant social projects to match with the proceeds, which include funding to SMEs, start-ups and low-to-moderate income households,” said the spokesperson. “As investors have strong interest in buying ESG, including social, KEB Hana wanted to maximise the attraction by making a commitment that KEB Hana’s use of proceeds will be financing or refinancing social projects only.”

On Monday of last week (11 January) the mandate for the debut was announced as well as investor calls from Wednesday to Friday, when the issuer highlighted key aspects of its programme, which – like Kookmin’s, but not KHFC’s – is based on dedicated Korean covered bond legislation.

“The triple-A structure of KEB Hana and Korean covered bonds is in line with major covered bond jurisdictions globally due to the strength of the well established Korean Covered Bond Act, which confirms elements such as dual recourse, bankruptcy remoteness, segregation, among others,” said the spokesperson. “They include prime Korean residential mortgages that have historically exhibited low credit risk, low LTV ratios and geographical diversity. Regarding the social aspect, KEB Hana highlighted that a large portion of KEB Hana’s financing is targeted to socially vulnerable companies and individuals. including those materially impacted by Covid-19.

“Investors felt comfortable with KEB Hana’s covered bond structure as well as the social initiatives. We got the sense that investors are becoming more comfortable with Korean covered bonds in general.”

On Tuesday morning, KEB Hana Bank leads BNP Paribas, Citi, Crédit Agricole, JP Morgan and Société Générale went out with initial price thoughts of the mid-swaps plus 33bp area for a euro benchmark-sized five year social bond. An initial update reported books over €1bn, and after the spread was revised to 28bp+/-1bp on the back of over €1.7bn of demand, a €500m (KRW667bn) issue was priced at 27bp on the back of over €2bn of orders, including €100m joint lead manager interest. The final book good at re-offer was €1.85bn.

A lead banker said strong turnout for the investor calls last week had indicated a number of high quality accounts were looking at KEB Hana’s debut.

“I’d say it’s the most granular roadshow we’ve had for an issuer out of Asia,” he added. “There’s a very positive attitude towards the region.”

He said South Korea’s covered bond legislation as the basis for the issuance is a “huge plus”.

The pricing of core Eurozone, Nordic and even Canadian paper at single-digit spreads over mid-swaps made KEB Hana’s 33bp guidance enticing, according to the lead banker, with the overall lack of supply and forthcoming heavy covered bond redemptions also playing into the deal’s reception.

“Investors understand it’s going to be hard replacing all of that inventory,” he said, “so in passing up on this kind of trade, not only are you passing up on a very attractive spread, but it’s also a rare issuer, and if you don’t pick this up now, you might have to wait a year at least until you see the next Korean supply.”

Lead bankers said KEB Hana’s 27bp re-offer spread was flat to slightly inside fair value, based on KHFC and Kookmin outstandings, and had beaten expectations.

“Base case was something in the high 20s,” said another lead banker, “so we beat that objective by a basis point or two.

“With further issues out of Korea,” he added, “that spread will hopefully grind tighter as time goes by.”

KEB Hana’s debut achieved greater oversubscription and a higher absolute level of demand than euro benchmarks from Berlin Hyp, RBC and Sparebanken Sør Boligkreditt on the same day.

“A lot of investors are opening their eyes to the South Korean region,” said the lead banker, “and it was the strongest book of yesterday’s (Tuesday’s) trades, so we all were obviously very happy with the result.”

The KEB Hana spokesperson said that, following its successful €500m debut, it aims to be a regular issuer in the international covered bond market.

“Also, with high quality mortgage assets, KEB Hana could consider issuing Korean won covered bonds in the domestic market,” they added. “KEB Hana will flexibly consider each funding source subject to market conditions.”

Separate to its own covered bond issuance, KEB Hana – like several Korean banks – originates KHFC mortgage loan products, and such loans may constitute part of the cover pool of KHFC issuance, each of which has a distinct cover pool.