Santander signalled the covered bond market to be open for business today (Monday), launching a four year euro benchmark that was around twice oversubscribed during bookbuilding this morning.

The issuer is understood to have moved at short notice this morning, after regularly monitoring the market, and built an order book of as much as Eu4bn.

“That’s clearly a very nice outcome for the issuer, especially because they were able to print well inside the guidance of the 185bp area that had been set,” said one syndicate banker away from the leads.

Another described the pricing as relatively fair. He contrasted the level with that on a Eu1bn five year issue launched by the Spanish bank in early January.

“When they came earlier this year the spread was 8bp over Bonos,” he said, “whereas this was something like 50bp over – although it’s not like the amazing 80bp over of BBVA’s five year a few weeks ago.

“The five year Santander was launched at 225bp over and is now at 180bp,” he added, “so it has performed, but Bonos have performed a lot, with the five year having been at 217bp over when Santander came in January and now at 150bp-160bp over.”

The first syndicate official also contrasted the result.

“In January, it was clearly a different market environment,” he said. “They managed to get the book slightly oversubscribed and we are now seeing a book that is more than twice the size, showing that investors are clearly comfortable with the name and have a positive view on Spain.

“When you add an attractive price to that, it makes a good mixture.”

Another covered bond banker said that today’s deal was Santander’s most successful trade in a long time, and that it confirmed the difference in tone between the market today and six to eight weeks ago.

“A lot of people are looking at peripherals and the national champions differently to back then and the end of last year,” he said. “A lot of investors have been doing their credit work.”

And a fund manager contested the view that Santander’s fate should be so closely tied up with that of Spain.

“Santander is seen more or less as a proxy of Spain if you look at how they have traded in various market situations,” he said. “But in my opinion it is not, indeed it is almost the opposite because it has so many international parts.”

But he, too, considered the pricing fair.

“It offered about 10bp over the mid-price of comparables,” he said, “and that’s OK. They offered it at the tight end of the range, but with such a big order book that was no surprise.”

Successes signal calm amid storm

One covered bond banker said that he was surprised that there are not more issuers seeking to issue, with the market apparently benign and the three most recent covered bonds – a sterling benchmark for Abbey National Treasury Services and a euro benchmark for ING Bank last week as well as Santander’s – having gone very well.

“There’s all this macro stuff going on with Libya and everything, but it hasn’t affected anyone,” he said. “It seems to have stopped people issuing, but has not made investors nervous.

“If I were an issuer, I’d do something.”

Another agreed.

“All in all, things are still positive,” he said. “We all need to take a careful stance and to prepare carefully, but it seems that the market is receptive of new issues again.”

Several euro-zone government bond auctions are due this week, with Portugal on Wednesday and Spain on Thursday.

Banca Carige is roadshowing until Wednesday and could launch a new issue shortly thereafter. Banca IMI, Barclays Capital, Landesbank Baden-Württemberg, Natixis and Royal Bank of Scotland have the mandate.

Danske Bank has been holding a non-deal roadshow that ends today to introduce its new “C” pool to investors. The cover pool includes commercial mortgages as well as other assets. Previous issuance has been backed by the bank’s “D” and “I” pools, which comprise Danish and international assets, respectively.

Barclays Capital, Credit Suisse, Commerzbank, Danske Bank and Natixis have been involved in the roadshow.