Demand for a Eu1bn 10 year transaction for Norway’s SpareBank 1 Boligkreditt developed slower than expected yesterday (Wednesday) and an official at the issuer told The Covered Bond Report that guidance was revised to reflect worsening market conditions.

The issuer announced a 10 year benchmark on Tuesday, with leads BNP Paribas, Deutsche Bank, Nordea and UniCredit on Wednesday morning opening order books based on initial price thoughts of the low 60s over mid-swaps.

A syndicate official at one of the leads said that the order book grew gradually over the morning, reaching Eu400m by 1030 CET and then passing Eu800m by 1230. The pricing thoughts were revised to 65bp over mid-swaps at this stage.

Orders were in excess of Eu1bn when the leads closed the books at 1330, with nearly 50 accounts participating. The deal was priced at 65bp over.

Arve Austestad, chief executive at SpareBank 1 Boligkreditt, put the new issue premium at 10bp-13bp.

He acknowledged that demand for the transaction built more slowly than expected, but said that he felt this was not necessarily a function of the pricing, instead reflecting a market that had become more challenging.

“We felt that the low 60s was a fair starting point but the revision of the guidance was a reflection of market conditions – a combination of heavy supply and a shakier credit market overall,” he said.

SpareBank 1’s deal was one of three deals that were priced yesterday, with Crédit Agricole selling a Eu1.25bn five year and Royal Bank of Scotland a Eu2bn three year. These benchmarks followed Eu10.25bn of supply in four days.

And while Norwegian covered bonds offer more spread stability compared with covered bonds from some other jurisdictions, he said, they are also one of the segments that trade tightest.

“So even a 10 year does not offer as much spread as other deals,” said Austestad.

The issuer considered a 12 year maturity for its deal, he said, but felt that 10 years was the best choice given the low rate environment and the depth of the market in that maturity.

“In this environment we felt that 12 years was a bit of a stretch,” he added.

The transaction had been planned for some time, according to Austestad.

“We always wanted to do something in Q3, or at the end of Q2,” he said. “Issuance is very window-driven, but in general Norwegian credits can access the market no matter how small the window.

“We felt that yesterday was the right timing to follow through with our plans.”

More than 45 accounts participated in the transaction, with the average size of orders more than Eu20m and the largest order exceeding Eu100m, according to one of the leads.

Germany took 54% of the bonds, the Nordic area 23%, France 7%, Asia 5%, the Benelux 4%, Austria 3%, Switzerland 2%, and others 2%. Banks were allocated 65%, insurance companies 14%, SSAs and central banks 12%, and asset managers 9%.