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.

Nordea Mortgage Bank hit the market in the morning, leads DZ, HSBC, LBBW, Natixis and Nordea opening books with guidance of the mid-swaps plus 25bp area for a €750m no-grow April 2028 green covered bond, expected rating Aaa. After around an hour and 10 minutes, they reported books above €2bn, including €280m of JLM interest, and after around two hours, the spread was set at 18bp on the back of orders above €3.1bn, with the number of accounts peaking above 100. The final book was above €2.3bn.

“We launched it quite early, 7.36am London time, and it just worked from the get-go, with investors piling in,” said a syndicate banker at one of the leads.

He cited the three year tenor as appealing to investors, with demand strongest in short to medium term maturities, and a defensive option in choppy markets. The rarity of the name – Friday’s euro benchmark is the Finnish issuer’s first since a €1bn 10 year in April last year – was a further attraction, as well as the tenor being rare for Nordic issuers, according to the lead banker, who also cited Nordea’s top quality profile and the green format.

“It had everything for investors,” he added.

The momentum in the order book – helped by what another lead banker said was an attractive starting point – allowed for tightening of 7bp and pricing roughly flat to even slightly inside fair value, according to the leads. Among reference points was a €1.25bn three year Commerzbank Pfandbrief, which was priced on 20 February at 22bp and latterly seen at the 18bp level achieved by Nordea.

“There was an argument to suggest even tighter pricing,” said the first lead banker, “but the issuer wanted to be quite inclusive. In terms of investors, we thought this could be basically just a bank treasury and official institution trade, but we had quite a few asset managers in there as well, which probably tells you that they are quite happy to buy short duration when markets are a bit tricky.”

Banks took 50%, funds 30%, central banks and official institutions 13%, and insurance companies and pension funds 7%. Germany, Austria and Switzerland were allocated 44%, the Benelux 21%, the Nordics 21%, southern Europe 7%, France 5%, and the UK and Ireland 2%.

“Not only was this a rip-roaring success in primary,” added the lead banker, “but also in secondary, closing at 15.5bp on the bid side.”

The re-offer spread of 18bp over mid-swaps is the tightest of any euro benchmark covered bond in over six months, since a €750m long three year LBBW trade at plus 14bp in September.

And at a Bund spread of 32.5bp, it is the tightest euro benchmark covered bond against German government bonds since April 2021, according to the lead banker.

“That tells you just how tight it was,” he said, “but it also shows that you can do that, so long as you’re issuing the sort of tenor the market really wants to buy.”

The spread also compares with 12bp and 17bp paid on three year trades in January by KfW and the EU, respectively.

Although many banks, including group parent Nordea Bank Abp, are in blackouts, Nordea is able to issue covered bonds during silent periods, including via Nordea Mortgage Bank in Finland.

“And because of the strength of the covered bond market, we have been active already so far this year,” said Mellor, head of bank debt, long term funding, at Nordea, “issuing both a large benchmark covered bond in Norwegian kroner from our Norwegian entity, and earlier this week from our Swedish subsidiary in Swedish kronor. We decided to monitor the euro covered bond market closer as well, because it has surprised us a little bit to the upside in terms of investor appetite.

“Given continued strong market conditions,” she added, “we decided to pull the trigger yesterday and we are very pleased with the result.”

Benchmark-sized floating rate syndicated covered bonds remain rare in euros, with only a handful issued in the past decade – although the last was relatively recently, a €750m three year issued by Toronto-Dominion Bank in August 2023 alongside €1.5bn fixed rate three year and €1bn eight year tranches.

“In recent weeks, there has been a very deep bid for floating rate in the unsecured market, especially in the short part of the curve,” said Peschel, treasury manager, Nordea.

With three month Euribor currently higher than the three year swap rate, the coupon on the FRN was more than 1% higher than what would have been available on a fixed rate benchmark in the same tenor.

“The floating format is clearly something investors want right now,” added Peschel, “so we were happy to offer them this innovative format, which at the same time offers some diversification for us.”

Nordea raised €1bn in the three year maturity last August in the typical fixed rate format, but found that some three-quarters of the €1.35bn order book for the FRN was different to that fixed rate benchmark, with a strong bid from the Nordics, for example.

“We were pleased to see how many orders it had,” said Mellor, “including new investors that we had not seen in our three year order book before, who wouldn’t normally buy a fixed rate covered bond from Nordea but were keen to buy an FRN.”

Nordea was meanwhile happy to see the long end of the market open after having been closed for the second half of last year. As well as its three year in August, the issuer sold a €1bn five year in October, after having sold a €1bn seven year back in February 2023.

“It is good to see that the longer end of covered bond issuance has opened up,” said Mellor. “We noted recent transactions where the books were strong, with asset managers, pension funds and insurance companies willing to buy seven years and beyond.

“When we saw this appetite, we thought that a seven year would enjoy a strong reception from the market, which it did.”

Leads Crédit Agricole, Deutsche, HSBC, Natixis, Nordea and UBS opened books with initial price thoughts of the three month Euribor plus 25bp area for the January 2027 FRN and the mid-swaps plus 41bp area for the January 2031 fixed rate tranche, both for euro benchmark sizes and with expected ratings of Aaa.

After around an hour and 50 minutes, the leads reported books above €3bn, skewed towards the fixed rate tranche and including €500m of joint lead manager interest. After around three hours, the pricing of the three year tranche was set at 20bp and the size at €750m, and the seven year at 35bp and €1bn, on the back of books above €3.7bn, with the final order books good at re-offer above €1.35bn (including €275m of JLM interest) and above €1.80bn (€225m), respectively.

A syndicate banker at one of the leads saw a pricing advantage for the floating rate tranche compared to a fixed rate alternative, and a 1bp premium for the seven year fixed, where fair value was seen at 34bp. According to pre-announcement comparables circulated by the leads, Nordea 3.5% August 2026s were at 13bp, mid, its 3.625% October 2028s at 27bp and 3% February 2030s at 34bp, while TD 3.765% September 2026s were at 30bp and its September 2026 FRN at a discount margin of 31bp.

Mellor said Nordea usually raises some €20bn-€25bn of long term funding annually, around half of it in Scandinavian markets, mainly via its local mortgage subsidiaries in covered bond format, and the other half in international markets, comprising covered bonds out of the Finnish mortgage subsidiary and senior preferred and non-preferred instruments from the mother company.

The Nordic issuer hit the market this morning shortly after having today announced its latest results.

“They moved quickly post-numbers,” said the lead banker, “to get ahead of competing supply from the Nordics and elsewhere from issuers coming out of their silent periods.”

Leads BNP Paribas, LBBW, HSBC, Nordea and SG opened books with guidance of the mid-swaps plus 30bp area for the euro benchmark-sized October 2028 Finnish covered bond, expected rating Aaa. After around an hour and 10 minutes, the leads reported books above €1bn, excluding joint lead manager interest, and after around two hours and 45 minutes, they set final terms of €1bn at plus 26bp on the back of orders exceeding €1.5bn, excluding JLMs, with the final book closing above €1.45bn, including JLM interest.

A banker at one of the leads said the five year maturity had been chosen to target the deepest pool of liquidity, as well as differentiating it from several recent shorter dated more esoteric benchmarks. The tenor was also a good fit for the issuer and complemented its earlier 2023 issuance, a €1bn seven year in February and a €1bn three year green covered bond in August.

Lead bankers put the new issue premium at guidance at 9bp-10bp. Pre-announcement comparables circulated by the leads included two Nordea Mortgage Bank euro benchmarks issued this year, 3.5% August 2026s at an i-spread of 7bp and 3% February 2030s at 26bp, while older 0.125% June 2027s and 1% March 2029s were at 17bp and 24.5bp, respectively.

“They started with a sensible NIP and got a good book behind them, enabling them to take the €1bn and achieve a very strong result,” said the lead banker.

Syndicate bankers away from the leads welcomed the deal’s success.

“The tenor is still the sweet spot and more or less the longest you can go these days,” said one. “It was well-timed after their results came out – fairly good results – and with a degree of stability in the market.

“So a good trade considering the market we are in. It wasn’t a super-blow-out, but they didn’t overpay and hence get a €2bn or €3bn book.”

Another said that although the leads put fair value closer to 20bp, it could arguably be seen at 23bp-24bp, meaning that Nordea’s outcome was all the more impressive.

“Then again, Nordea is a name that usually gets a lot of attention, even if they may start a bit tighter than others would need to,” said the syndicate banker. “They also got the size they wanted and only small drops based on the numbers they put out.”

Stadtsparkasse München was also in the market today, with a sub-benchmark Pfandbrief, following a mandate announcement yesterday.

Leads BayernLB, Erste and Helaba opened books with guidance of the 30bp area for the €250m no-grow October 2028 mortgage Pfandbrief, expected rating AA+ (Fitch). After around an hour and a half, the leads reported books above €300m, including €265m of JLM interest, and after around two-and-a-quarter hours, they revised guidance to 28bp+/-1bp, will price in range, on the back of books above €360m. The spread was ultimately set at 27bp on books above €375m, including JLM interest, and the final book was above €325m.

Today’s supply comes after LBBW reopened the German market on Monday with a €500m no-grow three-and-a-half year public sector Pfandbrief and Banca Popolare di Sondrio sold a €500m no-grow five year OBG on Tuesday.

The Italian deal, expected rating AA (Fitch), was priced at mid-swaps plus 81bp on the back of books above €790m, including €75m of JLM interest, following guidance of the 83bp area. Unlike preceding OBG issuance, Banca Popolare di Sondrio’s new issue came inside BTPs, while 48% was placed domestically and 52% outside Italy. The bank said the transaction completed its medium to long term funding plan for 2023.

A syndicate banker said the week’s deals should give issuers that have been monitoring the market greater confidence in approaching investors, even if supply next week will remain subject to developments in the Middle East and macroeconomic news.

“The market is there – you just need to be aware of your own name recognition and/or be pragmatic in recognising the requisite starting level. Many issuers do acknowledge that – also with respect to how things may compare to January, and choose to pre-fund.

“But – somewhat unusually for covered bonds – it depends very much on the day, with nervousness about conditions persisting.”

The volume and number of tranches are more than on any other day this year, while no more than four issuers have hit the market with euro benchmarks on a single day. The slew of supply comes after new issuance last week found record-breaking demand for covered bonds despite a surprise cut in the Eurosystem CBPP3 bid from 20% to 10%.

“The market is still on fire,” said a syndicate banker involved in today’s issuance. “Maybe not red hot like last week when everything just exploded – books sizes are a bit more moderate and issuers are paying maybe a basis point or so more in new issue premiums – but at the end of the day, they all worked very well on a very busy day.”

This was borne out by the ability of the market to comfortably absorb not one, but two French dual tranche trades: €750m (no-grow) three and €1.5bn nine year tranches for SG SFH, and €1.75bn long fours and €750m 10s for Crédit Mutuel Home Loan SFH. They both achieved strong oversubscription, while SG was able to achieve NIPs of 1bp and 3bp at re-offer spreads of minus 1bp and 27bp, respectively, while its compatriot’s paper was priced flat to its outstandings and with a 1bp-2bp premium at re-offers of 15bp and 32bp.

SG SFH was even able to tighten the pricing on its short-dated tranche by 6bp from initial guidance of the 5bp over mid-swaps area to minus 1bp.

“Of course, this negative surprised some investors, who turned their backs on the deal,” said a syndicate banker at one of the leads. “But investors have to accept that issuers have pricing power again after having suffered for about a year.”

SG achieved a final book, pre-reconciliation and excluding joint lead manager interest, of more than €2.75bn on its three year and more than €2.35bn on its nine year, while Crédit Mutuel’s books were above €2.6bn for the long fours and over €1.25bn for the 10s.

“The main takeaway is that they were able to take a good chunky volume out of the market in a relatively short space of time,” said a banker at one of Crédit Mutuel’s leads. “When two such issuers go head to head, there’s always the question if there will be enough room, but we proved that there was – and Crédit Mutuel was even able to take out slightly more (€2.5bn versus SG’s €2.25bn).”

He said that on a curve-adjusted basis, Crédit Mutuel paid perhaps a couple of basis points more than SG for its short-dated trade, attributing the differential to SG’s lower activity in benchmark covered bond issuance in recent years.

The long-dated French supply comes on top of €1.25bn of 10 year paper from Caisse de Refinancement de l’Habitat on Friday, which was priced at 28bp on the back of some €2.8bn of demand that allowed for tightening from 33bp and an ultimate NIP of around 1bp.

Nordea Mortgage Bank was meanwhile today able to price the tightest €1bn or larger seven year trade of the year, despite progress being slightly slower than on some trades, while the spread was tightened 2bp from initial guidance of the 18bp area to a re-offer of 16bp. The final order book was €1.6bn while the new issue premium was around 2bp.

“The fact they were able to get this much demand despite this being the tightest €1bn seven year of the year is very pleasing,” said another lead banker.

“Covered bonds were probably one of the slower asset classes out of the starting blocks at the beginning of the year,” he added, “but they are now working as well as any.”

UniCredit (HVB) rounded off today’s supply, following up on a mandate announcement on Friday with a €1.25bn two-and-a-half year public sector Pfandbrief. Pricing was tightened from the minus 2bp area to minus 7bp on the back of over €2bn of demand, with the new issue premium deemed 0bp-1bp.

Compatriot NordLB is set to go down the tried-and-tested short-dated route with a €500m no-grow three year mortgage Pfandbrief, expected tomorrow (Tuesday), while the next trade from the UniCredit group has already been mandated, a long six year green euro benchmark from Bank Austria.

The Helsinki-headquartered banking group had already issued green covered bonds out of its Danish, Norwegian and Swedish entities – the latter a SEK6bn (€550m) debut earlier this month that attracted a peak SEK15-plus of demand – but today’s issue for Nordea Mortgage Bank represents its first euro benchmark green covered bond.

Leads BNP Paribas, Deutsche, HSBC, Nordea and UBS opened books this morning with initial guidance of the mid-swaps plus 6bp area for the December 2025 deal, expected rating Aaa. After an hour and 20 minutes, they reported books above €1.5bn, and an hour later they set the spread at plus 2bp on the back of books above €2.25bn, excluding joint lead manager interest.

“This was a cool project,” said a syndicate banker away from the leads. “A very strong trade, particularly if we compare it with the OP trade, which was somewhat similar.”

He noted that Nordea’s initial guidance of plus 6bp was the level at which its compatriot’s €1bn long three year covered bond landed on 14 November – OP Mortgage Bank’s deal had initial guidance of the 8bp area and a final €1.4bn book.

“Both are strong Finnish issuers,” he added, “and OP has performed since then, but Nordea’s Nordea. Make it green, make it short, and it flies.”

Today’s issue is Nordea Mortgage Bank’s third euro benchmark of the year, and a lead banker said that although the short maturity is unusual for the issuer, it made sense after seven and 10 year trades this year in March and September, respectively.

“And then three years was the obvious choice in terms of what the market was really looking to take down better than anything longer,” he added.

A syndicate banker away from the leads said that based on Nordea’s curve, fair value could have been as tight as minus 2bp, but taking into account recent supply such as OP’s, it was arguably closer to mid-swaps flat, implying a new issue premium of 3bp give or take 1bp – lower than that achieved on most recent supply.

The lead banker said that Nordea trades at most 1bp tighter than OP, meaning that the main differentiating factor was the ESG nature of today’s deal.

“You could make an argument that this is one of the bigger demonstrations of greenium,” he added. “We had some pretty decent central bank/official institution-type orders, as you might expect, and a few of the prominent guys on the green side on the basis of the ESG angle, which also helps get the OIs more motivated.

“All that cumulatively probably helps you get a bit more price tension and extract a bit of a premium relative to conventionals.”

The deal was announced as a €1bn no-grow – when “no-grow” language is typically used for smaller trades – given that issuers such as ING had recently taken larger amounts out of the market in short-dated new issues – €1.75bn of two year funding in the Dutch bank’s case, noted the lead banker.

“You’d associate Nordea with being a €1bn or more-type issuer,” he added, “so we felt that it would help to be pro-active and offer a good degree of transparency to tell the market from the get-go that this would be minimum and maximum €1bn.”

The new issue was the only new euro benchmark covered bond today after three issues across Monday and Tuesday, with supply in other asset classes also light, and the lead banker said this made for good timing on Nordea’s part, with there being less pressure on spreads.

“All three trades they’ve done this year have been very well timed at different points and for different reasons,” he added, “and they’ve certainly left the market in a better place, which is always a good thing and very Nordea-like.”

The last supply beyond of seven years or longer came on the eve of the Russian invasion, when Crédit Mutuel Home Loan SFH priced a €500m 10 year at 8bp over mid-swaps on 23 February as part of a €2bn dual-tranche issue. The longest-dated issue since then was a €1.25bn six year for CFF on 8 March.

A syndicate banker at one of the leads said the new Finnish benchmark was launched on the back of successful issuance of 10 years and longer in the SSA market, and following feedback from investors that they would be open to a seven year trade from a strong Nordic name such as Nordea. The improved tone of the credit market was meanwhile highlighted by the launch of the first euro Additional Tier 1 issue of the year yesterday (Wednesday), a €1bn deal for Intesa Sanpaolo, even if the lead banker said the market in general was a touch weaker today.

Nordea’s deal was announced this morning, leads BNP Paribas, HSBC, LBBW, Nordea and UBS going out with guidance of the mid-swaps plus 8bp area for the March 2029 euro benchmark, expected rating Aaa. After around two hours and five minutes, they reported books above €2bn, excluding joint lead manager interest, and after nearly two-and-three-quarter hours they set the spread at 4bp on the back of books above €2.1bn. The deal was ultimately sized at €1.5bn and the final book good at re-offer was above €2.1bn.

“At the end of the day, we can say the market is open for seven years,” said the lead banker. “Those who gave us the positive feedback were there in the book today, so investors seem to be shifting focus from five years to seven years.

“I’m not sure whether that will last long,” he added, “because we are living on headlines, so to speak – if something arises in connection to Ukraine or CPI data, it maybe will change. But for now, you can print seven years if you are a strong and established name.”

Today’s covered bond is Nordea Mortgage Bank’s first euro benchmark since a €1bn eight year deal in June 2019 and only the second from Finland this year.

According to pre-announcement comparables circulated by the leads, Nordea March 2027s were quoted at mid-swaps minus 4bp, mid, June 2027s at minus 3.3bp, and February 2033s at minus 0.4bp, but the lead banker said the syndicate saw fair value around mid-swaps flat, although it could be seen a little tighter. He noted that the new issue premium was higher than that paid by Crédit Agricole Home Loan SFH for a €1.75bn long five year on Tuesday, but said this could come down for longer dated issuance if the market remains relatively stable.

A syndicate banker said another seven year benchmark could emerge as early as tomorrow (Friday) from a name at a wider spread than Nordea, which he said should help it succeed on the last day of the week.

Arkéa Public Sector SCF’s mandate was announced this morning, and leads Crédit Agricole, Crédit Mutuel Arkéa, DZ, LBBW, Nykredit and Santander opened books with guidance of the mid-swaps plus 9bp area for the March 2028 euro benchmark, expected rating Aaa. After around two hours, they reported books above €800m, excluding JLM interest, and after around two hours and 20 minutes, they set the spread at 5bp for an expected size of €500m on the back of books above €950m. The size was ultimately set at €500m on the back of books around €700m of orders, excluding JLM interest, good at re-offer.

According to pre-announcement comparables circulated by the leads, Arkéa Home Loans SFH October 2027s were quoted at plus 1bp and July 2029s at 2bp, while Crédit Agricole Home Loan SFH’s long five year on Tuesday came at 4bp.

A lead syndicate banker said that while the deal had been a success, the book had built slowly and that, given the modest size of the deal, he had expected it to be priced slightly tighter.

Today’s deals came after Hamburger Sparkasse yesterday priced a €500m no-grow five year mortgage Pfandbrief at 2bp over mid-swaps. Leads BayernLB, Commerzbank, DekaBank, Hamburger Sparkasse and UniCredit built a book above €1.8bn on the back of initial guidance of the 6bp area, and the final order book good at re-offer was above €1.5bn.

Nordea Mortgage Bank leads HSBC, LBBW, Nordea, SG and UBS launched the seven year issue with guidance of the mid-swaps flat area this morning. The leads later announced that books had surpassed EUR1.5bn, and subsequently set the spread at minus 3bp and the size at EUR1bn with books in excess of EUR1.8bn, including EUR100m joint lead manager interest. Final books good at re-offer were over EUR2bn, with more than 80 accounts.

“It’s gone very well,” said a syndicate banker at one of the leads. “A book of over EUR2bn for a EUR1bn is a very strong outcome, and it is a very high quality book.

“Nordea has always enjoyed a very strong investor following,” he added, “and they always execute clinically, no messing about.”

Another syndicate banker at the leads said the deal will go down as having helped restore market confidence, following several weeks in which issuers have had to navigate fluctuating demand and offer enticing new issue premiums.

Some syndicate bankers at and away from the leads said Nordea’s deal paid only a negligible new issue premium, citing Nordea Mortgage Bank February 2023s – one of the issuer’s most recent deals – at minus 6bp, mid.

“For sure, this is the lowest new issue premium post-Easter for a EUR1bn trade,” said a lead syndicate banker.

However, other syndicate bankers suggested the deal paid a new issue premium of more like 4bp, citing Nordea’s older November 2024s at minus 8bp, mid and March 2027s at minus 5bp.

“Both schools of thought have their merits,” said another lead syndicate banker. “We have been hearing from investors that they prefer to look at more recent transactions, hence I would be more in the camp of interpreting fair value based on the recent five year than the older, longer bonds.

“What is the real driver here is relative value, in particular with German investors seeing value versus SSA names.”

The deal is Nordea Mortgage Bank’s second appearance in the euro covered bond market this year, following a EUR2bn dual-tranche deal in February, comprising the EUR1.25bn February 2023s and a EUR750m February 2033 issue.

Maureen Schuller, head of financials research at ING, noted that the February 2023s were trading slightly wide of the rest of Nordea’s curve. Nordea Mortgage Bank November 2023s were seen at minus 7.5bp, mid, for example.

Schuller suggested that the February 2023s therefore have tightening potential, and said this would also hold for the new seven year issue if priced closely in line to the interpolated curve between the February 2023s and February 2033s.

One of the lead syndicate bankers said Nordea had decided to launch the deal today to get out ahead of public holidays at the start of next week, and to take advantage of strong market conditions and a lack of competing supply.

Commerzbank announced this afternoon that it has mandated ABN Amro, Commerzbank, DZ Bank, Santander and SG to lead manage its EUR500m no-grow seven year mortgage Pfandbrief. A syndicate banker at one of the leads said the deal will be launched tomorrow (Friday), subject to market conditions.

Syndicate bankers away from the leads suggested fair value for the new issue will be around minus 12bp.

Today’s Finnish and French deals came after two euro benchmark trades that were deemed by bankers to have experienced only modest receptions, a EUR500m eight year Pfandbrief for Berlin Hyp that attracted over EUR700m of orders but was priced in the middle of guidance on Monday, and a EUR500m seven year issue for Sparebanken Vest Boligkreditt yesterday (Tuesday) that drew EUR580m of demand and was priced 1bp inside the middle of guidance.

This came after wider recent market volatility and a reported increase in investor selectiveness since the turn of the year, and bankers said that the two issuers in the market today had adjusted their strategies accordingly.

“What was particularly interesting about both today’s trades was their starting points,” said a syndicate banker away from the deals. “Both looked more attractive with regards to concessions, so it looks like we might be seeing the start a slight repricing that has been necessary – especially after the last trades did not get a great reception from investors.”

Nordea Mortgage Bank leads Barclays, Credit Suisse, Deutsche Bank, Natixis and Nordea this morning launched the five year tranche with guidance of the mid-swaps minus 8bp area and the 15 year tranche with guidance of the mid-swaps plus 2bp area.

Guidance for the five year tranche was revised to the minus 10bp area, with books over EUR1.9bn, and guidance for the 15 year tranche revised to the mid-swaps flat area with books over EUR1.4bn. The spread of the five year tranche was ultimately fixed at minus 11bp and the size at EUR1.25bn, and the spread of the 15 year tranche at minus 1bp and the size at EUR750m.

The initial guidance of the five year issue was deemed to have offered a new issue premium of around 7bp, with the deal ultimately paying a premium of around 4bp. Bankers cited Nordea Mortgage Bank January 2022s at around minus 17bp, mid, and November 2023s at around minus 15bp.

Bankers said that fair value for the 15 year tranche is harder to calculate given the deal extends the issuer’s curve by six years. Some said the most appropriate comparable was an ABN Amro January 2033 issue, which was priced at 2bp and seen trading at around minus 1bp, mid, today. They noted that Nordea Mortgage Bank’s covered bonds trade slightly tighter than ABN Amro’s at the shorter end of the curve, and suggested the deal paid a final premium of around 2bp – having initially offered a premium of 5bp.

BPCE SFH announced a mandate yesterday for a euro benchmark obligations de financement de l’habitat issue with a seven-and-a-half year maturity, via leads Barclays, Crédit Agricole, Mediobanca, Natixis, Nykredit and UniCredit.

The leads launched the September 2025 deal this morning with an indicated size of EUR750m and guidance of the mid-swaps minus 5bp area. After around one and a half hours the leads announced that books were over EUR1bn.

Guidance was subsequently revised to the minus 7bp area, plus or minus 1bp will price within range, and the size set at EUR1bn with books over EUR1.3bn, excluding joint lead manager interest. The spread was ultimately fixed at minus 8bp with books over EUR1.6bn, excluding JLM interest.

The initial guidance was said by bankers to have offered a new issue premium of 7bp-8bp, and the deal was deemed to have paid a final premium of 4bp-5bp, with BPCE February 2025s seen at around minus 14bp, mid.

Bankers noted that today’s new issue premiums were higher than those earlier this week: yesterday’s Sparebanken Vest Boligkreditt deal was touted as offering a 5bp new issue concession versus the issuer’s secondaries with its initial guidance of the minus 4bp area, but some market participants noted that more recent comparables implied a slimmer premium, while Berlin Hyp’s deal paid a premium of 2bp-3bp at its spread of minus 15bp.

They said that given the demand both today’s deals received, other issuers are likely to follow suit.

“The outcome of the deals prove it was clearly the right approach,” said a syndicate banker away from the leads. “It is good that you can get the benefit in terms of dynamics by adjusting the pricing strategy, and we can take comfort from these deals.

“I think it would be very natural for other issuers to follow this template. You could argue whether you would need to take this approach for a EUR500m no-grow trade, but these issuers have set a new reference, and it would be very difficult for another issuer to not take this into consideration.”

Another syndicate banker agreed, noting that the deals attracted the biggest books in the covered bond market this month.

“Nordea got well over EUR2bn of combined demand and BPCE were able to upsize their deal while still tightening the spread,” he said. “You can’t argue with that.”

Syndicate bankers at BPCE’s and Nordea’s leads noted that the final premiums paid by the deals were in line with those paid by some deals earlier in the year, but agreed the starting levels were more generous than those of previous trades.

Some bankers also questioned how relevant secondary levels were for the pricing of the deals, suggesting that the spreads of previous new issues were a more useful guide.

Nordea’s new issue is the first benchmark Finnish covered bond of the year, with the last a EUR1bn long five year for OP Mortgage Bank on 15 November. Nordea Mortgage Bank’s last benchmark issuance was a EUR1.5bn five year in January 2017.

It is the biggest deal in the euro covered bond market since 3 January, when ABN Amro priced a EUR2bn single-tranche 15 year.

“I like the approach of going for a dual-tranche deal with two distinct maturities – rather than the five and 10 year or eight and 12 year combination that you see sometimes,” added a syndicate banker away from the leads. “It ensures there is no cannibalisation.”

BPCE’s deal is the eighth benchmark covered bond from France since the start of the year.

When announcing its results last Wednesday, Groupe BPCE said it aims to raise around EUR6.6bn of covered bond funding in 2018 – 30% of its total wholesale funding target. BPCE subsidiary Compagnie de Financement Foncier (CFF) sold a EUR1bn 10 year obligations foncières on 3 January.

The week kicked off on Monday with three issuers active in the euro covered bond market – Nordea Mortgage Bank with a Eu1.5bn five year, DBS a Eu750m seven year, and La Banque Postale a Eu500m eight year – and Nordea’s shorter dated deal was deemed the most resounding success of the three, priced at 4bp through mid-swaps with a coupon of 0.025% and drawing over Eu2.4bn of demand. The result highlighted investors’ increasingly clear preference for shorter dated paper, something that was taken on board by the next two issuers to come to market.

“We spent a while thinking about the maturity, but concluded that the five year part of the curve is the sweet spot, where demand is deepest,” Eivind Hegelstad, COO and head of investor relations at SpareBank 1 Boligkreditt, told The CBR. “It’s a sign of the times.

“We’re in an environment now where European economies are starting to perhaps turn a corner, where perhaps things are going to change in monetary policy, and where perhaps rates may start to go up again, at some point. People take that into consideration when they prefer shorter maturities.”

SpareBank 1 Boligkreditt leads Commerzbank, Crédit Agricole, DZ Bank and Nordea launched the deal on Wednesday morning with guidance of the 4bp over mid-swaps area, before revising guidance to the 2bp area and fixing the size at Eu1bn, with the books “well above” Eu1.5bn. The deal was then re-offered at flat to mid-swaps and the book closed at almost Eu2bn, pre-reconciliation.

The deal was priced with a coupon of 0.05% to yield 0.097%.

Hegelstad said the shorter dated deal had been made possible by a recent rise in rates, which enabled SpareBank 1 to price the deal with the slightly positive yield. For much of last year, short and even intermediate dated covered bonds from many jurisdictions traded in negative territory, and although some German issuers priced negative yielding benchmarks, most issuers preferred to move further out the curve.

“Also, if things start to move in the wrong direction with more negative rates later on then it would once again become difficult or fairly impossible for us to issue a five year,” Hegelstad added. “From that perspective, it’s good to get it done while you can and while rates in the five year segment are positive.”

The final order book was around Eu1.7bn with around 100 accounts. Banks were allocated 55% of the deal, asset managers 28%, central banks and official institutions 14%, and pension funds and insurance companies 3%. Accounts from Germany and Austria bought 45%, the Nordics 15%, the Benelux 12%, the UK and Ireland 8%, France 8%, Asia 5%, Switzerland 3%, and others 4%.

“We’ve very happy with the response from the market,” said Hegelstad. “It was as expected – we have a strong environment and we issued the right maturity.

“When we tightened the price to 2bp, demand was clearly over Eu2bn, which is very strong in my view.”

Hegelstad said some accounts had placed limits, many of these at 2bp, and subsequently dropped out of the deal, but that the books still justified the further tightening to the final spread of flat to mid-swaps, which was the unanimous advice of the four leads.

Also on Wednesday, Aareal leads Commerzbank, DekaBank, DZ Bank, LBBW and UniCredit launched the German bank’s July 2022 deal with guidance of the mid-swaps minus 5bp area, before fixing the spread at minus 8bp on the back of books over Eu1.3bn. The deal was priced with a coupon of 0.01% to yield 0.069%.

The final book stood at almost Eu1.5bn. Banks were allocated 43.5% of the deal, fund managers 30.5%, central banks and official institutions 23% and insurance companies 3%. Accounts from Germany bought 77.4%, Asia 15%, France 3.8%, Switzerland 3%, and others 0.8%.

“With nearly three times oversubscription and more than 60 participating investors, we feel this trade went very well,” said Tobias Engel, director, treasury, head of capital markets at Aareal. “The spread of minus 8bp is a fantastic outcome but nothing unusual in this new CBPP environment.

“Looking at the positive performance of the bond, investors seem to be pleased, too.”

The paper was seen trading at re-offer to slightly tighter this (Friday) morning.

The deal was Aareal’s first euro benchmark Pfandbrief since September 2014 and its first benchmark in any currency since March 2015, when it sold a $500m April 2019 issue. Engel said the issuer had been relatively quiet in the interim as a result of acquisitions of Corealcredit and WestImmo.

“Both banks were well funded and due to the fact that we reduced our non-strategic assets in the loan book, funding needs were quite limited,” he said.

No further benchmark issuance emerged after Aareal and SpareBank 1 tapped the market, and bankers expect the pace of supply to continue to be moderated by banks’ blackout periods. With rates largely unaffected by an ECB meeting yesterday (Thursday), at which no major policy announcements were made, those issuers that do come to market are expected to continue to favour the shorter end.

“It’s not just investors who have been clamouring for shorter-dated options,” said a syndicate banker. “It seems issuers are also pretty pleased, as you have to bear in mind that many who sold longer dated deals last year were only doing so because of a lack of alternatives, and guys outside the Eurozone couldn’t even get the shorter funding provided by the TLTROs.

“For so many reasons, fives are the maturity of choice.”