Bankinter today (Friday) became the first Spanish bank to launch a cédulas hipotecarias issue since Spain eased sovereign debt fears with a successful auction yesterday, with the bank selling a Eu500m two year deal. Meanwhile, Intesa Sanpaolo reopened the Italian market.

Bankinter, Barclays Capital, HSBC, Landesbank Baden-Württemberg and Natixis are pricing the issue at 310bp over mid-swaps. The previous high was 290bp over for a four year cédulas tap by Cajamar (Caja Rural Sociedad Cooperativa de Credito) last year.

A banker away from the trade said it was “as defensive as you can get”, with its two year maturity, modest Eu500m target size, and spread in the 300s over mid-swaps.

“And with the positive backdrop from the Spanish auction,” he added, “if it didn’t work now, it would never work.”

A syndicate official at one of the leads confirmed that the auction, coming after a successful Portuguese one the day before (Wednesday), had been a key factor in the timing of the new issue.

“I think the auctions have been fairly positive for the market as a whole,” he said. “In the covered bond market, people had been awaiting the outcome.

“We saw BBVA and Santander with benchmarks last week and after that there were a number of smaller Spanish banks that were willing to go to the market, but were waiting for the auction to give a bit of tone.”

Even after the auction, executing Bankinter’s transaction was no easy task, according to market participants.

“They spent a while trying to pull that together,” said one syndicate official. “I heard a level of 300bp and then 320bp. Then they came with guidance of the 315bp area and have tightened that to 310bp.

“But that’s inevitable in this kind of market and it does sound like they have got reasonable traction. I heard that they had a book of Eu800m.”

A covered bond banker said that the spread level would send shockwaves through Spanish second tier banks, adding that Bankinter is “not the worst bank in Spain”.

But market participants foresee further Spanish covered bond issuance, even at such expensive levels.

“Inevitably,” said one, when asked if he expected more. “Some will look at this kind of spread and say: ‘No way,’ but I’d be surprised if we don’t see more.”

Intesa Sanpaolo launched the first Italian covered bond benchmark of the year this morning, a Eu1.5bn 10 year deal off its public sector-backed programme through Banca IMI, BNP Paribas, ING, Royal Bank of Scotland and UniCredit. It, too, followed a successful auction for its sovereign yesterday.

“We had not seen any Italian covered bonds so far this year,” said a syndicate official away from the leads. “I think Intesa wanted to wait for the Italy auction before moving and if the auction had not been successful they would not have come out today.”

After taking indications of interest, the leads opened books for the obbligazioni bancarie garantite with guidance of the mid-swaps plus 185bp area. With orders quickly nearing Eu2bn, guidance was revised to 180bp-185bp over, and the spread was ultimately fixed at 180bp over and the size at Eu1.5bn with a book totalling Eu2.75bn.

A banker away from the leads said that the 185bp over guidance had looked too generous, but that the re-offer spread made sense.

A syndicate official suggested that other Italians could follow in Intesa Sanpaolo’s wake, with Banco Popolare di Milano coming first.

“Most of the Italians are looking,” he said, “but I’m not sure what their timetables are. The Banco Popolare mandate has been hanging around but I believe that they will now bring that early next week.

“The general tone for Italy is a lot better than it was in the early part of this week, so now is the right time to launch that deal.”

Peripheral euro-zone issuance could take a larger share of overall issuance next week, suggested one banker.

“This week has been pretty active,” he said, “specifically Germany and Sweden, with two deals yesterday and today, so maybe they will be a bit quieter next week.”

However, Bayerische Landesbank will follow up this week’s four German benchmarks with a July 2016 public sector Pfandbrief via BayernLB, Crédit Agricole, DZ Bank, HSBC and Société Générale.

Swedbank Hypotek launched a five year covered bond via Barclays, BNP Paribas, HSBC, Swedbank and UniCredit this morning at the 45bp over mid-swaps area after SEB sold a Eu1.25bn five year deal at 39bp over through Barclays, BNP Paribas, HSBC, Swedbank and UniCredit.