Nordea announced on Monday that it had completed the demerger of Nordea Bank Finland over the weekend, as part of a strategy under which Nordea plans to turn each of its national subsidiary banks into branches of the Swedish parent.

Andreas Larsson, head of debt investor relations and ratings at Nordea, told The Covered Bond Report that Nordea Mortgage Bank could launch its first euro covered bond during the fourth quarter of this year.

“Now that the new company is registered we are starting to look into the issuance possibilities in the euro market again,” he said.

Larsson added that Nordea Mortgage Bank’s approach to issuance will be consistent with that of Nordea Bank Finland.

“It is only a change of name,” he said. “We will continue with the same cover pool, and do not plan any changes to our issuance.”

Nordea Bank Finland sold its last benchmark covered bond, a Eu1.25bn 2022 issue, in October 2015.

The outstanding covered bonds of Nordea Bank Finland, along with all assets and liabilities relating to the former issuer’s covered bond business, have been transferred to the new entity Nordea Mortgage Bank. Bondholder approval for the transfer was obtained in a consent in April.

In a sector comment published yesterday (Tuesday), Moody’s said that the credit quality of the transferred covered bonds, and any new issuance from Nordea Mortgage Bank, will continue to reflect the credit strength of Nordea Bank Finland. It said this is because Nordea Bank Finland established a committed liquidity line for the benefit of Nordea Mortgage Bank with a view to ensuring that it has sufficient funds to meet its obligations, with the liquidity line to apply equally to the transferred bonds and any new issues.

Moody’s also noted that the transferred covered bonds will continue to have recourse to Nordea Bank Finland under a guarantee, although Nordea Bank Finland will now be a secondary guarantor of the bonds rather than the primary obligor. The rating agency views this change as being credit neutral.

Any new issuance from Nordea Mortgage Bank will not be covered by the guarantee and will therefore not have recourse to the former issuer.

“In this respect, new issuance under the Finnish covered bond programme will be consistent with the Nordea group’s programmes in Sweden, Norway and Denmark,” said Moody’s. “In the covered bond programmes in these countries, the credit quality of covered bonds reflects the credit strength of the rated parent through the provision of a committed liquidity line.

“However, bondholders do not have a senior unsecured claim against the rated parent.”

Nordea on 4 March launched a consent solicitation targeting all 37 covered bond series issued by Nordea Bank Finland, to gain bondholders’ consent for Nordea Hypoteksbank to assume the role of issuer while Nordea Bank Finland is converted into a branch of the Swedish parent.

In meetings held on 1 April, Nordea obtained approval from the holders of 34 of the 37 covered bond series, while the meetings regarding the three remaining covered bond series did not achieve the quorum of 50% of the outstanding principal amount.

The meetings were therefore adjourned until yesterday and the quorum lowered to one or more persons representing any amount. Following the adjourned meetings, Nordea announced that the extraordinary resolution had been passed.

Consent instructions equal to 20% of the principal amount were received from eligible bondholders for a Eu50m September 2019 FRN (XS0835318196), with all in favour. For a Eu70m May 2021 FRN (XS1072529677) and a Eu10m February 2022 FRN  (XS0740844609), consent instructions equal to 100% of the principal amount were received, with all in favour.

The restructuring is part of a strategy under which Nordea plans to turn each of its national subsidiary banks in the Nordics into branches of the Swedish parent. The planned demerger date is 1 July 2016.

Deutsche Bank, Merrill Lynch International and Nordea Bank Danmark are solicitation agents.

The demerger of the Finnish covered bond operations of Nordea from Nordea Bank Finland into Nordea Hypoteksbank Abp (Nordea Mortgage Bank plc), was approved at an extraordinary general meeting of the Finnish bank yesterday (Thursday). Nordea is turning its national subsidiary banks in the Nordics into branches of the Swedish parent under a “One Nordea” strategy and, as reported by The CBR last month, is demerging the covered bond-related businesses of its Finnish bank into the new covered bond issuer.

Nordea said in its announcement of the consent solicitation today that the demerger and related changes are being undertaken in order to preserve the existing covered bonds’ status as covered bonds under the Finnish Covered Bonds Act. It noted that the structure of its Finnish covered bond programme will also be aligned with its programmes in Denmark, Norway and Sweden.

The move is subject to regulatory authorisation, including the obtaining of a mortgage credit bank licence in accordance with Finnish legislation. The planned demerger date is 1 July 2016.

Moody’s said today (Friday) that the demerger, in and of itself and as of this time, will have no rating impact on covered bonds issued off the covered bond programme of Nordea Bank Finland (NBF).

“Under the proposed demerger, the assets and liabilities of NBF’s covered bond business, including the covered bonds issued under NBF’s covered bond programme, would be transferred to the new issuer,” the rating agency said. “However, the covered bond rating would remain linked to the credit strength of NBF. This is because NBF will establish a liquidity line for the benefit of the new issuer with a view to ensuring that the new issuer has sufficient funds to meet its payment obligations under the covered bonds.

“Moody’s notes that NBF will provide a secondary guarantee of the covered bonds transferred to the new issuer under the demerger,” it added. “This secondary guarantee will not apply to bonds issued by the new issuer after the demerger is completed.”

In the consent solicitation Nordea is seeking bondholder approval for the changes.

“The interests of covered bondholders are of foremost importance to the issuer,” said Nordea. “The issuer and Nordea Bank AB have taken, in their opinion, necessary steps to ensure the interests of covered bondholders are adequately protected post the implementation of the demerger and the completion of the cross border merger, via the execution of the deed poll as well as the NBF Guarantee.”

An early participation fee of 10 cents is available. The early instruction deadline is 18 March, the expiration deadline 30 March and meetings are scheduled for 1 April.

Deutsche Bank, Merrill Lynch International and Nordea Bank Danmark are solicitation agents.

Proposals to be put to the AGM include the merger into Nordea Bank AB (publ) of Nordea Bank Danmark A/S, Nordea Bank Finland Abp and Nordea Bank Norge AS, all planned to occur on 2 January 2017.

“A branch structure will decrease the administrative complexity and make the operations of Nordea more efficient,” said CEO Casper von Koskull earlier this month. “The change will support our work to increase our agility and make us more competitive to the benefit of our customers.”

Nordea Bank Finland has hitherto been the main part of the group to issue covered bonds in euros, with the Danish (through Nordea Kredit) and Swedish arms active in their respective local currency markets and the Norwegian arm (via Nordea Eiendomskreditt) in foreign currencies apart from euros, such as US dollars and sterling.

However, in respect of the Finnish merger the group notes that the mortgage credit operations of Nordea Bank Finland will not be included in the respective merger, since the branch will be a non-Finnish company and therefore “not able to obtain the necessary covered bond licence pursuant to the Finnish Covered Bond Act”.

It is expected that Nordea will therefore establish a new, specialist Finnish covered bond issuer.

Nordea Bank Finland’s most recent benchmark was a Eu1.25bn seven year deal in October.

Nordic banking groups have adopted and adjusted their covered bond strategies across the different jurisdictions in a variety of ways, most recently with Danske at the beginning of the month announcing plans to establish a Swedish covered bond issuer.

Today’s deals arrived amid an improving wider market environment, with the iTraxx Main this morning opening 1bp tighter and the iTraxx Crossover 3bp tighter, and with covered bond spreads stable. However, bankers said new issue conditions remained challenging after a week in which elevated spreads and limited demand meant a modest MünchenerHyp Eu500m long six year was the only euro benchmark to be sold.

Bankers noted that today’s trades progressed relatively slowly, with book updates not arriving until late morning, but said the eventual results were encouraging in a week when the pipeline is well stocked and further supply expected.

Nordea Bank Finland leads Barclays, LBBW, Nordea and Société Générale are pricing the seven year issue at 7bp over mid-swaps, after having gathered Eu2bn of orders. The deal was launched with initial price thoughts of the 10bp area before guidance was set at 8bp plus or minus 1bp. The size of the deal was not available at the time The CBR went to press.

Syndicate officials said the size of the order book was particularly impressive even when considering that the deal is eligible for CBPP3.

“It is a very good outcome, and I am quite glad to see a deal like this, especially after the tough times we have had and at the beginning of a week in which we will likely see more activity,” said one.

Syndicate officials away from the leads said fair value for the new issue was around flat to mid-swaps, based on Nordea Finland’s secondary curve. The issuer’s June 2020s were quoted at minus 2bp, bid.

“That looks fair,” said a syndicate official away from the leads.

The new issue is Nordea Bank Finland’s second euro benchmark of the year, following a Eu2bn dual tranche 5.25 year and 12 year deal in March.

Bank of Ireland Mortgage Bank leads Citi, HSBC, Morgan Stanley, Nomura and SG launched the Eu750m February 2021 issue with IPTs of the 35bp over mid-swaps area, before issuing guidance of 33bp-35bp and then fixing the spread at 33bp. The books closed at over Eu1bn.

“It is another good result,” said a syndicate official away from the leads. “They have paid up to get it, but not by so much, and it’s encouraging to see a peripheral deal get some size and tighten in the pricing.”

Syndicate officials away from the leads said fair value for the new issue is in the low 20s, based on Bank of Ireland’s secondary curve, with the January 2020s seen as trading at around 20bp, bid. They noted that AIB Mortgage Bank July 2020s were also quoted at around the same level.

They said this was in line with the premiums offered by recent peripheral deals, with a Bankinter Eu750m five year on 1 October and a Banco Popular Español Eu750m six year on 23 September cited as paying pick-ups of 15bp-20bp from secondaries.

“With the market still uncertain, that was the right approach to take,” said a syndicate official.

He said the new issue also offered a 30bp-40bp pick-up versus the Irish sovereign.

“That’s a very healthy pick-up, and it no doubt was a factor in this deal going well.”

The deal is the third time Bank of Ireland has tapped the euro covered bond market to sell a benchmark this year, with the issuer having printed a Eu750m five year in January and a Eu1bn seven year in April. AIB’s Eu750m five year issue in July was the most recent Irish trade.

Caffil this afternoon announced a mandate for a euro-denominated January 2023 issue, which is expected to be launched tomorrow, subject to market conditions. Barclays, Crédit Agricole, Deutsche Bank, LBBW and Natixis have the mandate.

The French issuer’s last deal was a Eu1bn 10 year priced at 3bp over mid-swaps on 2 September. Its January 2022 and April 2023 issues were this morning quoted at 4bp and 5bp through mid-swaps, bid, according to a banker at one of the leads.

Syndicate officials said several issuers are watching the market, with Banca Carige and Raiffeisenlandesbank Niederösterreich-Wien having completed roadshows last week and deals also expected from Hypo Tirol and Raiffeisenbank a.s., which finished promoting potential deals at the end of September. Eika Boligkreditt and Sparkasse Pforzheim Calw will complete investor roadshows and calls tomorrow (Tuesday).

“They will have been watching how these very early bird movers work,” said a syndicate official. “But I fear that things will continue to be difficult this week, and there will be no easy sells.”

Another covered bond banker said that although the covered bond market could be benefiting from a better wider tone in financials, the level of new issue premiums required remains elevated.

“A new issue premium of 6bp-8bp for a core European name like Nordea is quite a lot,” he added.

However, one syndicate official said today’s trades gave good reason for optimism.

“These results are encouraging, Nordea’s in particular,” he said. “I think that we will see more good supply this week.”

Nordea Bank Finland leads BNP Paribas, HSBC, Nordea, NordLB and RBS went out with initial price thoughts of the 6bp through mid-swaps area for the 5.25 year tranche and of the low single-digits area over for the 12 year tranche. The levels were then tightened to guidance of the 8bp through area and the mid-swaps flat area, respectively, before the re-offer levels were set at minus 10bp and minus 2bp. The leads built a total order book of Eu4bn across the two tranches, each of which were sized at Eu1bn.

“You don’t see many two tranches deals,” said a syndicate official at one of the leads. “It just shows how remarkably robust the covered bond market is.”

The total size of Eu2bn makes it the largest benchmark covered bond since Santander launched a Eu3bn deal in November that was split into Eu1.75bn 10 and Eu1.25bn 20 year tranches.

A syndicate official away from the leads suggested the five year tranche was priced flat to the issuer’s curve and, noting that a Nordea 2024 was trading at minus 8bp, bid, suggested the 12 year tranche offered a new issue premium of around 2bp.

“It was a good result all round,” he said.

Another said that both the levels and demand were “really impressive”. He noted that the Nordea 2024 was issued at 1bp over mid-swaps at the end of October, also being the first CBPP3-eligible deal issued after the programme’s start.

“Now they have achieved a negative spread for an even longer bond,” he said.

Another banker meanwhile said that the dual tranche format was “a nice approach”.

Bankia is expected to launch a long 10 year, September 2025, covered bond tomorrow (Wednesday), having mandated Bankia, BBVA, Deutsche Bank, Natixis and Nomura to lead manage the euro denominated deal. The transaction will be the Spanish issuer’s first since Bankia sold a Eu500m two year at 290bp over mid-swaps in February 2012 with a 4% coupon.

A syndicate official at one of the new issue’s leads said that Bankia February 2025s have been trading at 42bp, mid, and April 2022s at 26bp. The last 10 year Spanish benchmark was a Eu1bn Bankinter issue that was priced at 38bp over mid-swaps and that was today quoted at 9bp, while other stronger names were at similar levels, with BBVA February 2025s at 11bp over and CaixaBank February 2025s at 15bp.

“It’s an ‘anything goes’ market,” said a syndicate official away from the latest deals. “Bankia will be as much of a blow-out as can be.

“Is that a good sign or a bad sign? We are getting close to a state of overheating that is hard to bear, but as long as the market is fuelled by such liquidity I don’t see why it should stop.”

Meanwhile, Coventry Building Society launched a £500m (Eu688m) five year FRN today. Leads BNP Paribas, Lloyds, RBC and Santander went out with guidance of the three month Libor plus 30bp-32bp area, before setting the re-offer at plus 30bp and with a final book of £575m.

A syndicate official at one of the leads noted that there were few comparables for the deal, with a DNB Boligkreditt February 2020 issue the only recent five year sterling deal to have been brought to the market – it was priced at 28bp over on 9 February.

“This was a very straightforward trade,” he added.

Banco Sabadell has mandated Barclays, Commerzbank, JP Morgan and Lloyds for what is set to be the first benchmark Spanish covered bond since a Eu1bn 10 year BBVA issue in June.

The Italian deal – the first since July – is only the second benchmark eligible for the European Central Bank’s third covered bond purchase programme to have been launched since the programme began, after a Eu1bn 10 year for Nordea Bank Finland yesterday.

Leads Barclays, BNP Paribas, Natixis, Nomura and SG opened book on the new Credem issue with initial price thoughts of the 30bp area, then revised guidance to the 27bp area, before fixing the spread at 25bp over on the back of a Eu2.9bn order book, according to a lead syndicate banker.

A syndicate official away from the leads said that the 30bp area was “eye-catching” and appropriate to get momentum. He said that while he had expected the level to be tightening, the ultimate pricing was impressive.

The lead syndicate banker put the 25bp level 5bp inside Credem’s curve. He said that the real money component of the book was “extraordinarily high”.

“The comfort that the covered bond purchase programme offer the market is enough to give even the most cautious investors the confidence to come in,” he said. “Indeed it is not too strong to say that CBPP3 is forcing investors to come into trades – it really is.”

Market participants have been keenly watching the outcome of new issues to gain an insight into the strategy central banks are adopting for CBPP3, but lead managers have not been directly disclosing any figures on their participation.

The lead syndicate banker said that interest from Eurosystem central banks under CBPP3 came in immediately that books were opened with IPTs this morning, with the order being at re-offer. He said that regarding allocations, they received “no special treatment”.

Central banks and official institutions – including government agencies, for example – were allocated 29.8% of Credem’s deal, although this included not only CBPP3 buying but also by institutions away from the purchase programme. Alongside this distribution, investment managers were allocated 46.5%, banks 15.6%, and insurance companies 8.1%.

Italy was allocated 29.2%, Germany and Austria 33.2%, France 15%, the UK and Ireland 7%, the Nordics 4.7%, Asia 4%, Switzerland 3.5%, and others 3.4%. CBPP3 buying is said to be being channelled through the national central bank of the issuer, and on Nordea Bank Finland’s deal yesterday the Nordics were allocated 17% – second to Germany and Austria with 49% – with the national central banks’ activity also understood to be in line with their respective sizes.

Central banks and official institutions were allocated a 22% share of Nordea’s Eu1bn deal and, according to a lead syndicate banker, this was a greater share than their share of orders. This implies that their total orders were less than 22% of the Eu3.7bn book, so less than Eu814m. Furthermore – again – the central banks and official institutions component includes distribution to European central banks but not under the auspices of CBPP3, and also distribution to Asian central banks and official institutions – total allocations to Asia were 7%. The lead syndicate banker said “this reduces by quite an amount” the potential CBPP3 share – suggesting that it is below some very large numbers that were touted in the market in the past 24 hours.

Another lead banker on Nordea’s deal said that CBPP3 interest was placed early on, during the IPTs phase.

“They don’t seem to be waiting to see if they will be a driving force or not,” he said.

Nordea priced its Eu1bn 10 year at 1bp over mid-swaps, after IPTs of the 6bp area. Bankers away from the deal highlighted, but did not criticise, the sharp move from IPTs to re-offer.

“There was no ambition to print at 1bp,” said the lead banker. “We were discussing something in the area of 4bp, with the obvious hope to price it on the tight side, at 3bp. The 6bp area was therefore a level where we could gain sufficient momentum and then be able to tighten 2bp-3bp.

“But during the process we had to constantly adjust this. As the book was growing and growing and growing, and because the issuer had decided to keep the size at Eu1bn, we had the chance to tighten in much more than expected.”

He said that the involvement of CBPP3 in size and at re-offer gave and will give the issuer the power to drive pricing tighter if it chooses to do so.

“In this case the issuer was very careful to say right from the start that it wanted a success leaving aside the Eurosystem, and that the price should be determined on the basis of demand from other investors.

“But I cannot guarantee that it will not be a driving force. It is up to the leads and the issuer to see what is possible with and without the ECB and they could be aggressive.”

Meanwhile, he noted that investors are of course conscious when placing their orders – in terms of pricing and size – of the impact that CBPP3 is having.

“There were investors who said that they would not like to see a single investor – i.e. the ECB – having a large portion,” he added, “but people were expecting the ECB to drive pricing.”

He said that, however, bank treasuries were a key driver of Nordea’s transaction.

“For bank treasuries, a positive spread on a Level 1 LCR asset is obviously something that is very hard to find these days, and they came in massively,” he said.

Another notable part of demand was trading accounts, he added.

“Traders are losing a lot of inventory to the ECB,” he said. “It’s a safe bet knowing that there is that backstop bid, and they are buying anything they can get their hands on.

“They came in in large size, but were of course the ones who didn’t get the bonds in the end.”

The European Central Bank’s third covered bond purchase programme started at the beginning of last week (20 October), but although it has confirmed Eu1.704bn of purchases since then these have not been of new benchmarks given that the only such supply there has been was from non-Eurozone issuers that are ineligible.

Today’s issue for Nordea Bank Finland – led by Barclays, LBBW, Natixis and Nordea – a total order book of some Eu3.7bn and was priced at 1bp over mid-swaps. This was well inside the initial price thoughts of the 6bp area, at which some Eu2.5bn of indications of interest are said to have been taken, and inside guidance of the 3bp area.

Syndicate bankers away from the leads were impressed by the order book and pricing.

“It’s obviously a bonkers result in terms of book size,” said one.

He also said that the pricing felt “slightly distorted”. He said that while a level of less 5bp for an outstanding old 4% April 2021 Nordea benchmark might not make 1bp look wrong, the low absolute level of rates made it a “very, very, very strong result”.

Another syndicate banker said that the outcome also surprised him. He said that the IPTs made sense and that he would have expected a final level of around 4bp over.

One suggested that the whole market had been overwhelmed by the Eu3.7bn book and that the leads had possibly been targeting a 3bp-4bp outcome in light of the IPTs. He said that the extent of the spread movement was surprising given that the leads had been able to get some feedback yesterday (Tuesday).

He suggested that Eurosystem participation under CBPP3 may have been the unpredictable element in between the leads’ initial soundings and the official bookbuilding process.

“It might have been the missing part of the equation for them,” he added, “as they have indicated that they are not going to play a lead order role.”

However, other bankers said that, from what they had heard, they did not believe central bank participation to have been sufficiently behind the deal’s momentum to explain this.

“It’s not a criticism,” said one, “but if you look at the whole process and where they started and finished, it shows that the leads and issuer didn’t really know what the clearing level for a 10 year deal was.”

A syndicate banker away from the leads said that according to his understanding some Eu400m of orders had been placed by Eurosystem central banks under CBPP3.

A syndicate official at one of the leads said that central bank allocations on Nordea were 20%-25%, although he noted that this included non-CBPP3 buying, with Asian central banks, for example, also in the book. He said that the allocations to central banks were slightly larger than their share of orders in the book. He also suggested that a precise breakdown of CBPP3 allocations would not be given.

Update: full distribution statistics: banks 39%, asset managers 25%, central banks/official institutions 22%, pension funds/insurance companies 12%, others 2%; Germany/Austria 49%, Nordics 17%, Asia 7%, Switzerland 7%, UK/Ireland 7%, France 6%, Benelux 3%, Italy 3%, others 1%.

Several bankers said that the demand for the 10 year maturity and the level achieved was very encouraging.

One said that it had clearly been there for the taking given the large demand for duration in the market and the recent saturation of five and seven year maturities, but others highlighted the level that was achieved.

A syndicate official said that the pricing flat to slightly inside what he considered fair value was unexpected and indicated – even if some orders were inflated because of the deal’s CBPP3 status – that investors are comfortable getting involved with core deals at tight levels and low yields. Others noted the increasing involvement of bank treasuries in longer maturities.

The euro benchmark is the first in the 10 year maturity since a Eu500m 10 year mortgage Pfandbrief for Sparkasse KölnBonn on 7 October at mid-swaps flat, and the first non-German in the maturity since an Abbey Eu500m 10 year at 14bp over mid-swaps on 11 September.

Nordea Bank Finland was described by one banker as an ideal candidate to kick off CBPP3 primary market activity.

“Of all the names that could have been first for CBPP3, this was probably the perfect choice,” he said.

Credito Emiliano (Credem) could give the market its first peripheral test, having this afternoon mandated Barclays, BNP Paribas, Natixis, Nomura and SG for a seven year OBG for launch in the near future.

The next new Eurozone issues, including the Italian deal, are now being eagerly awaited to see how CBPP3 activity evolves. One banker said that Spanish names are in the mix, with Irish supply also possible.

“The telephone lines on the DCM side are running at full steam,” said another banker. “Now, after Nordea has tested the water, I’d expect four, five or six deals by the end of next week.”

Meanwhile, Raiffeisenbank a.s launched a first Czech benchmark in the euro market. Leads Barclays, BNP Paribas and RBI went out with initial price thoughts of the low 30s over mid-swaps for a five year deal, followed by guidance of the 32bp area, before fixing pricing at 32bp on the back of Eu500m of demand, including Eu250m that the issuer will retain.

Nordea Bank Finland

Caisse Française de Financement Local priced its obligations foncières issue at 36bp over mid-swaps on the back of nearly Eu1.8bn of orders from just over 80 accounts, with leads Barclays, BNP Paribas, Commerzbank, LBBW and Natixis able to tighten the spread from initial price thoughts of the 40bp over area and then guidance of the 38bp over area.

The deal is Caffil’s third euro benchmark covered bond since emerging as the successor to Dexia Municipal Agency and Philippe Mills, CEO of Société de Financement Local (SFIL), the parent of Caffil, said he was pleased with how investors had received it.

“One year after its creation under the impulse of the State, Caisse Française de Financement Local is now a recognised borrower in the international bond market, as testified by the quality and variety of investors that have underwritten this first issue of the year,” he said.

A syndicate official away from the leads said that the pricing on Caffil’s deal is in line with December levels.

An official at the issuer said that at 36bp over mid-swaps, the deal came flat to Caffil’s curve and 6.5bp wider than French government bonds. It makes inroads into a financing programme of Eu4bn-Eu6bn for the issuer in 2014, up from the Eu3bn raised in 2013 through public issues and private placements, according to the official.

He noted that the distribution of yesterday’s issue partly reflects marketing efforts in 2013 across Asia and Europe, with Asian investors taking 10% and Germany and Austria 56%. France took 14%, Asia 10%, Nordics 7%, the Middle East 6%, Italy 2%, UK 2%, the Benelux 2%, and others 1%.

Investment managers were allocated 32%, banks 27%, central banks and official institutions 22%, and insurance companies 19%.

Nordea Bank Finland, meanwhile, priced a Eu1.5bn five year issue at 7bp over mid-swaps yesterday after leads BNP Paribas, HSBC, Nordea and UniCredit built an order book of Eu2.25bn. That followed initial price thoughts and guidance of 8bp-10bp, with guidance subsequently revised to 8bp over plus/minus 1bp.

The issuer was the first to publicly announce a covered bond mandate in 2014, doing so on Thursday to book a slot and then proceeding to engage with investors on their maturity preference, with demand centring on five years, according to the lead syndicate official.

He said that Nordea paid a similar new issue concession to that on a DNB Boligkreditt benchmark in November, maybe slightly bigger, and that Nordea’s deal was a “good statement of strength” given competing SSA and higher yielding peripheral and other senior unsecured supply.

A syndicate banker away from the leads said Nordea achieved “a good price”, but mentioned that the spread was maybe 1bp-2bp wider than where syndicates were pitching levels in early December.

One hundred and thirteen accounts participated. Germany took 36%, the Nordics 19%, the UK and Ireland 17%, France 8%, Asia and the Middle East 6%, Switzerland and Austria 6%, the Benelux 4%, and other Europe 4%.

Banks were allocated 56%, central banks and official institutions 23%, fund managers 17%, and insurance companies and pension funds 4%.

Nordea enters a silent period today.

The mid-morning verdict from syndicate bankers on a range of FIG deals was that the first round of issuance was going well, with one noting that today’s covered bond transactions – from core issuers Caisse Française de Financement Local (Caffil) and Nordea Bank Finland – were not being drowned out by other deals in the market, including from the periphery.

Italy’s UniCredit, for example, was one of several issuers tapping the euro senior unsecured market, and was a “riot” of a deal, according to a lead syndicate official, drawing more than Eu3.5bn of orders pre-reconciliation from over 300 accounts for a seven year deal that will be priced at 170bp over mid-swaps. Abbey National Treasury Services and BNP Paribas are also selling senior unsecured deals, while Lloyds Bank reopened the sterling covered bond market for UK issuers after a lengthy lull. (See separate article here.)

In euro benchmark covered bonds the first issuer to close order books on a deal this year was Caffil, which is pricing a Eu1bn 10 year obligations foncières issue at 36bp over mid-swaps on the back of more than Eu1.5bn of orders.

Leads Barclays, BNP Paribas, Commerzbank, LBBW and Natixis set initial price thoughts (IPTs) at the 40bp over area before guidance was revised to the 38bp over area.

Nordea Bank Finland was also able to tighten its spread, having started with IPTs and guidance of 8bp-10bp and ended up at 7bp over for a Eu1.5bn five year deal, with more than Eu2.2bn of orders placed, pre-reconciliation. BNP Paribas, HSBC, Nordea and UniCredit are the leads.

Syndicate bankers gave mixed assessments of new issue premiums, with one saying that in covered bonds they were in line with last year’s, but another seeing concessions as larger than in 2013, although not large.

“The Nordea and Caffil IPTs were on the slightly cheaper end, but still a fair level,” he said. “The market is supportive, but spreads have tightened too much and investors are pushing a bit more for higher spreads.”

Some syndicate officials away from the leads put fair value for a new Caffil 10 year OF variously at 30bp-32bp over and 35bp over, and saw the deal as having been marketed fairly.

One syndicate official was struck by what he described as a high new issue concession for a low beta issuer like Nordea, putting fair value in the low single-digits and therefore seeing IPTs of 8bp-10bp over as a “pretty generous starting point”.

Euro benchmark issuance is expected to continue tomorrow (Wednesday) with a deal from Australia’s ANZ Banking Group, while peripheral supply is also said to be likely to emerge.