Royal Bank of Scotland built the biggest order book of a busy day in the primary market this (Tuesday) morning, while Crédit Mutuel-CIC tested long dated appetite for the first time since the euro interest rate outlook changed last week, and La Caixa and Banco Popolare deals arrived.

RBS is pricing a Eu2bn five year Regulated Covered Bond at 110bp over mid-swaps, the tight end of guidance of 110bp-115bp over. Leads BayernLB, Danske, HSBC, RBS and Société Générale built a book of over Eu4bn.

RBS banking hall, Edinburgh

A syndicate official at one of the leads said that the main reference was a Eu1bn seven year benchmark RBS sold on 7 January, which was priced at 125bp over mid-swaps and was this week seen at around 120bp over.

“The RBS spread was fair compared with other RBS issues,” said an investor, although he added that he was happy to take on other UK names like Abbey and Lloyds TSB, which trade at wider spreads.

Leads BNP Paribas, Natixis and RBS opened books for a 10 year CM-CIC Covered Bonds benchmark with guidance of the 85bp over mid-swaps area and generated orders of more than Eu1.5bn this morning. They are expected to price an issue of Eu1bn-Eu1.25bn.

The transaction is the first benchmark covered bond from France since 15 February, when Caisse de Refinancement de l’Habitat issued a Eu1.75bn 12 year, and the first 10 year benchmark since 16 February, when UniCredit Bank Austria sold a Eu1bn deal. Following comments from European Central Bank president Jean-Claude Trichet last week indicating that interest rates could rise, market participants had been wondering how the market for 10 year paper would fare given the new interest rate outlook.

“The spread of 85bp is fair,” said a fund manager at a German insurance company, “although we are looking mainly at the coupon, which is interesting for life insurers, with a potential low of 4%.

“Of course, we hope that the market will play with us and yields to not increase further,” he added.

Leads JP Morgan, La Caixa, LBBW, Nomura and SG went out with guidance of the 200bp area for the four year La Caixa issue, even though some bankers away from the deal considered the target ambitious.

“Some people said that the 200bp area was a bit punchy,” said a banker at one of the leads, “and that the low 200s would have been right. But we sounded out a handful of account beforehand and the feedback was good, and there was no reason to widen it if we had a decent shadow book.”

By mid-morning the leads has built an order book of over Eu1.5bn, comprising almost 100 accounts. Pricing of a Eu1bn deal at 200bp is seen as the most likely outcome.

Banca Aletti, BNP Paribas, Goldman Sachs, RBS and UBS built a book of around Eu1.5bn for a five year Banco Popolare issue at guidance of the 185bp area, and will price a Eu1bn-plus issue at 185bp over.

The deal reinforces the success of Italian banks in the covered bond market after a strong deal for Banca Cargie and a tap for Banca Popolare di Milano last week.

“We are very cautious about the PIGS,” said a German investor, “with the exception of Italy. However, we have some country limits and we have to check on them.”

Banco Popolare last issued a new benchmark covered bond on 17 January, a Eu700m March 2014 issue priced at 170bp over mid-swaps, which it increased by Eu250m at the same level on 10 February.

“Let’s hope the market improves a little bit more so that we can launch some of the more exotic names,” said one covered bond banker.