Spanish and Italian credits are considered the hottest candidates for new issues next week, with names from each country in the frame after supply from Banca Carige and taps this week. But core demand was also affirmed as Swedbank Hypotek wrapped up a new benchmark. 

Some market participants said that La Caixa was one Spanish name rumoured and a syndicate official said that the market could be receptive to a deal from the Spanish bank. 

“I consider La Caixa as one of Spain’s strongest banks alongside Santander, so it will then just be a question of what maturity they choose,” he said. 

However, one market participant was sceptical about the chances of a La Caixa issue emerging. 

“They issued at the beginning of February, so I’m really not sure if they will show up,” he said. “But it is one of those issuers that is usually opportunistic so if we see a Spanish wave, who knows?” 

An investor said that this week’s activity, where solid Nordic names had thrived alongside second tier southern Europe names, showed that the market could digest supply from a variety of credits. 

“Among the investor community, as in the sovereign space, there are two camps,” he said. “Investors either go for the solid names – which includes Nordic covered bonds – or the PIGS. 

“Both parties have enough supporters, which is why we believe that covered bond spreads are still in tightening mode. Each can find its buyers right now.” 

Crédit Agricole’s latest covered bond sentiment index (CSI) found that investors in southern Europe surveyed at the end of February were more bullish on the prospects for their local covered bonds. Florian Eichert, senior covered bond analyst at Crédit Agricole, said that this was “highly important” considering other international investors’ appetite for these regions had remained about the same – although the survey results suggested these countries were also gaining support from Scandinavian investors. 

Banco Popolare is one Italian bank that is seen as a candidate for a new issue next week. The bank last tapped the market with a new issue in mid-January, a Eu700m three year at 170bp over mid-swaps, which it tapped for Eu250m on 10 February at the same level. 

Any Italian deal will come after the Eu500m four year issue for Banca Carige priced yesterday and a Eu350m tap by Banca Popolare di Milano on Wednesday. 

Before this week’s supply, five Italian issuers had tapped the market amid the heavy supply of the first several weeks of the year, and Giacomo Burro, Banca Carige’s chief financial officer, told The Covered Bond report that he had been keen to avoid the melée. 

“At the beginning of the year, the market did not seem so good,” said Giacomo Burro, Banca Carige’s chief financial officer. “However, it has improved in the meantime. 

“We went on a two team roadshow from Monday to Wednesday and met with a lot of investors. We had very good feedback, with them being positive on Italian names.” 

Leads Barclays Capital, Intesa Sanpaolo, LBBW, Natixis and RBS took indications of interest from investors on Wednesday afternoon and then went out with price guidance of the 165bp over mid-swaps area yesterday morning with Eu400m of indications of interest in hand and built a book of Eu1.2bn. The paper was re-offered at 163bp over mid-swaps. 

“We started with a price whisper of 165bp-170bp and then had a good response, so were able to achieve the 163bp re-offer level.” 

The guidance compared with outstanding September 2013 and November 2016 issues at mid-swaps plus 140bp and 163bp, respectively. 

On Wednesday afternoon Banca Popolare di Milano tapped a November 2015 issue for Eu350m at 165bp over mid-swaps. Burro said that the BPM increase came as a surprise, but did not negatively affect the execution of Carige’s deal. Indeed he was pleased with the relative pricing. 

“We had never priced better than BPM and this was the first time that we could do so,” he said. 

Carige’s new issue is the second Eu500m deal it has sold, after one in September. 

“When we went on a roadshow before the September deal we were really very open in our thinking with what investors might like regarding maturity and size,” said Burro. “We then saw that transactions below the Eu1bn benchmark size were well accepted, and at that time reaching Eu1bn was more the problem. 

“This time, we went out with the idea of doing Eu500m from the beginning, given the size of the asset pool. Some investors said that they would like Eu1bn better, but most, particularly many buy-and-hold accounts we met, said that it didn’t matter if they like the issuer and the cover pool.” 

Italy was allocated 42% of the paper, Germany and Austria 27%, the UK/Ireland 18%, Spain 4%, France 4%, and others 5%. Banks took 32%, funds 32%, insurance companies 27%, central banks 7%, and others 2%. 

Swedbank Hypotek priced a Eu1.5bn September 2014 benchmark at 30bp over mid-swaps yesterday via leads Credit Suisse, Danske, LBBW, Natixis and UniCredit. This followed shadow bookbuilding at the low to mid-30s and guidance at the low 30s area. 

“Tighter pricing than the plus 30 we ended up with could have been on the table,” said a syndicate official at one of the leads. “I think this was a good compromise reached in terms of printing a good sized deal and at the same time leaving some room for the issue to perform in the secondary market.” 

References for the guidance were outstanding January 2014 and June 2015 Swedbank benchmarks, which were trading at 26bp and 38bp, respectively. 

While a book of Eu2.2bn validated the price guidance, which some had considered ambitious, some investors were not overly tempted by the offering. 

“We looked at it, but there was no-pick-up to secondaries in our opinion,” said a German fund manager. “We did participate, but only with a low single-digits ticket, so nothing really.” 

However, he acknowledged that the order book demonstrated that the deal was clearly to many investors’ tastes. 

Germany was allocated 43% of the issue, the Nordics 27%, the UK 10%, Asia 10%, the Benelux 5%, Austria 3%, France 1%, and others 1%. Banks took 58%, asset managers 23%, central banks 17%, and others 3%. 

The maturity was chosen to fit between the January 2014 and June 2015 points on Swedbank’s curve, according to the lead syndicate official.