Royal Bank of Scotland is tapping the market today (Wednesday) with a benchmark five year euro transaction amid continuing volatility, after SpareBank 1 Boligkreditt issued a Eu1bn transaction five year yesterday that the issuer was satisfied to see go so well.

RBS leads Citi, Credit Suisse, Danske Bank, HSBC, Natixis and RBS set its initial guidance at the 150bp over mid-swaps area. A syndicate official at one of the leads said the book was growing steadily, and that the books would be closed around lunchtime.

He said UK and Scandinavian investors as well as central banks were driving orders. The pricing and size are to be determined this afternoon, he said, but the trade will be a minimum Eu1bn.

A syndicate official away from the leads said a March 2016 from RBS was yesterday trading at 130bp on the bid side, meaning RBS was paying about a concession of 15bp-20bp.

“It should attract investor interest,” he said.

Another syndicate official said the spread RBS was offering was “very generous”.

This deal follows a three year Eu2bn three year transaction sold at the end of August at 93bp over mid-swaps.

One of the syndicate officials added that the transaction had taken him by surprise. Syndicate bankers rated the chances of further issuance as low, with volatility remaining high, if not as extreme as yesterday.

“We’re seeing more or less the same range compared to yesterday,” said a syndicate official, “with Bund futures at 138.50. Investor reluctance is still pretty pronounced and I would not assume that the picture is going to change dramatically.”

Norway’s SpareBank 1 Boligkreditt successfully pulled off its Eu1bn five year trade yesterday. Henning Nilsen, director, head of finance and risk at SpareBank 1, told The Covered Bond Report that the issuer had been continuously monitoring the market before issuing.

“We decided to try out the market, and we’re very happy we did,” he said. “Of course there is always a risk involved when trying to access the market, particularly at this time, but we’re continuously meeting investors on the road, and we think that has paid off.

“We’re very satisfied that we are able to access the market even with such market conditions.”

Nilsen said Norway being outside the euro-zone, and also the very healthy financial situation of the Norwegian government, may have helped the transaction gather as many investors as it did. The leads built a book of Eu1.7bn.

Barclays Capital, BNP Paribas, Commerzbank and HSBC priced the transaction at 63bp over mid-swaps, the tight end of guidance of 63bp-65bp over, which followed initial price thoughts of 65bp over area. Nilsen said he thought the pricing was in line with expectations, with the bank having to pay a new issue premium of about 8bp-10bp.

A syndicate official from one of the leads said they priced the transaction based on an outstanding March 2017 issue from SpareBank 1, which was at 57bp-58bp mid yesterday.

“I thought it was great to see this working so well in the meltdown yesterday,” he said.

Nilsen said SpareBank 1 had opted for a five year maturity because it had done two 10 year transactions earlier this year.

“So this fit our duration and redemption profile,” he said. “The five year seemed to meet the deepest demand from investors in the current market environment.”

The lead syndicate official said the transaction had a strong safe haven bid, while Ted Lord, head of European covered bonds at Barclays Capital, said that SpareBank 1’s success went beyond the Norway play.

“Investors like their business model and the credit policies within the group for mortgage lending,” he said. “In addition, SpareBank 1 Boligkreditt has maintained a strong investor interface throughout the year and has been one of the most peripatetic covered bond issuers in 2011.”

Germany and Austria took 39%, the Nordics 22%, the UK and Ireland 22%, eastern Europe 5%, Switzerland 4%, the Middle East 2%, the Netherlands 2%, France 2%, and others 2%. Banks took 53%, fund managers 27%, central banks 9%, insurance companies 5%, private banks 3%, and corporates 3%.

The paper was offered 2bp tighter in the aftermarket.