Unicaja got a Eu500m five year cédulas hipotecarias issue away at the tight end of guidance yesterday (Wednesday) before the Kingdom of Spain’s rating was cut a notch by Moody’s today. The downgrade is expected to contribute to a slowdown in supply.

The remainder of the week looks quiet for the covered bond market, said syndicate bankers, although generally the market was said to be holding up.

“But on the other hand you have North Africa,” added one syndicate official. “It’s about to explode and will have a negative impact on the market if it continues. The meetings of the EU leaders are also looming and we are waiting for an announcement from the Bank of Spain with regards to the recapitalisation of the banking system there.

“I haven’t heard of anything on the pipeline, so maybe we’ll have a quieter period in the covered bond world for the next week.”

Italian and Spanish deals were closed yesterday in spite of the increasingly lacklustre market.

After closing books yesterday afternoon with Eu750m of demand for a five year transaction, Unicaja refined guidance from 250bp-260bp to 250bp over mid-swaps and issued Eu500m.

“Unicaja is a smaller name compared to the other issuers from this week,” said a syndicate official from one of the leads. “Clearly there was a bit of luck that the Moody’s downgrade we saw of Spain today did not affect us.

Banca MPS's Palazzo Salimbeni

Banca Monte dei Paschi di Siena settled on a Eu1.25bn size for a five and a half year deal after leads Banca IMI, LBBW, Mediobanca, MPS, RBS and UBS built a Eu1.5bn book at guidance of 180bp-185bp over mid-swaps.

“We knew at this spread level there was some kind of interest,” said a syndicate official at one of the leads. “We succeeded in getting indications of interest of around Eu950m within the first one and a half hours, without having all the issuer information yet, so I think that’s very positive.”

Pricing was arrived at after an examination of secondaries and new issue premiums attached to other southern European issuers. The paper was re-offered at the tight end of guidance, at 180bp.

“Bookbuilding went as expected,” said a banker at another of the leads. “The issuer’s target was Eu1bn so anything above that could be considered a success.”

Italy was allocated 34%, Germany and Austria 26%, the UK 16%, France 14%, Nordics 6%, Spain 2%, the Benelux 1%, and others 1%. Banks were allocated 63%, fund managers 19%, insurance companies 5%, and hedge funds 3%.