Nordea Finland leads covered reopening but peripherals top

Nordea Bank Finland got the ball rolling in euro benchmark covered bonds in 2014 when it priced one of the first deals of the year on Tuesday, with Eu8.5bn across nine issues priced by today (Thursday), including one for Norway’s Sparebanken Vest.

Nordea was the first issuer to publicly announce a covered bond mandate, doing so last week and then pricing a Eu1.5bn five year deal on Tuesday when new year primary market issuance kicked off in earnest. It was a relatively sedate start in euro covered bonds, with Caisse Francaise de Financement Local (Caffil) the only other issuer out with a deal, but there was plenty of activity in the senior unsecured markets, Svenska Handelsbanken fired the starting gun for bank capital supply, and covered bond issuance stepped up a gear over the next two days.

“The market has been strong across asset classes,” said Viet Le, financial institutions and covered bonds syndicate manager at Crédit Agricole CIB. “The highlight of the week has been the success of peripheral deals, but the market is wide open for core issuers, too, and they have options across maturities and market segments.

“Nordic issuers are entering into blackout, but we expect activity there to pick up after results are released.”

By this afternoon nine issues totalling Eu8.5bn had been priced, including the first peripheral supply of the year. Portugal’s Caixa Geral de Depósitos (CGD) and Spain’s Banco Mare Nostrum yesterday (Wednesday) sold Eu750m and Eu500m five year deals, respectively, with CGD drawing Eu4bn of demand from more than 200 accounts to underline the strength of demand for high yielding supply. The deal was the first from Portugal since January 2013 (also a CGD benchmark) and was priced at 188bp over mid-swaps.

A syndicate official on the transaction said that a rally in Portuguese government bonds was helpful, but that the main driver of the transaction was the strong bid for high beta supply.

“It’s the name of the game this year,” he said. “People expect high beta to perform.”

The strength of demand is such that an unfamiliar issuer like Banco Mare Nostrum can achieve a similarly positive outcome in the market, he added. The Spanish issuer sold what was its first benchmark covered bond at 190bp over on the back of some Eu1.7bn of orders.

Core issuers nevertheless fared well, too. Indeed a syndicate banker said that subscription levels for deals from core countries are positive and encouraging given the difference in spread between them and peripheral supply, and given the amount of supply that has hit the market this week.

Nordea Bank Finland priced its Eu1.5bn issue at 7bp over mid-swaps, after guidance and initial price thoughts of 8bp-10bp, with investors placing a total of Eu2.25bn of orders. BNP Paribas, HSBC, Nordea and UniCredit were leads.

A syndicate banker on the deal said that the issuer 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.

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 entered a silent period on Wednesday.

Norway’s Sparebanken Vest Boligkreditt, meanwhile, priced a Eu500m no-grow five year issue at 10bp over today, the tight end of guidance of 10bp-12bp and IPTs of the low teens.

Leads Commerzbank, HSBC, Nordea and UniCredit collected more than Eu850m of orders, with a syndicate official on the deal saying the deal had gone well, attracting a good mix of investors, and that the new issue premium was in line with that paid by Nordea.

Sparebanken Vest’s deal was one of three euro covered bonds in the market today, the others being a Eu1.25bn seven year for Credit Suisse at 13bp over and a Eu1bn five year at 18bp over for Commonwealth Bank of Australia.