SpareBank 1 Boligkreditt sold a Eu1.25bn seven year benchmark at 77bp over mid-swaps yesterday (Tuesday) after the issuer had been watching the market, waiting to launch a longer dated transaction, an official at the Norwegian issuer told The Covered Bond Report.

“The advice from the leads was to go now, and it was the right move,” said Eivind Hegelstad, COO and head of investor relations at SpareBank 1 Boligkreditt.

Leads Barclays Capital, Deutsche Bank, Société Générale and UniCredit built a book of Eu1.85bn comprising 110 accounts.

Hegelstad said SpareBank 1 had planned to raise Eu1bn, but because it had strong demand, with an order book of nearly Eu1.9bn, and high granularity in the book, it decided to increase the deal size.

A syndicate official at one of the leads said the transaction was very successful.

“It was strategically very good to issue this week,” he said. “SpareBank 1 was the main focus because there were no other euro covered bonds.”

The issuer chose a seven year tenor because it matched its maturity profile.

“We also recognised an open bucket,” said Hegelstad. “There hadn’t been much issuance in this spot for a while.

“The bank already has a March 2017 outstanding, so if we planned another five year, it would have to be a longer five year, whereas the 2019 was an empty maturity bucket.”

He noted that the issuer also accesses the dollar market with shorter maturities.

“We tend to go longer on the euro market,” he said.

The lead syndicate official noted that the deal was the first seven year jumbo covered bond this year.

“Typically you find two camps of investors,” he said. “Bank treasuries usually go for the belly of the curve and the insurers choose the long term maturities.

“This transaction matched both investor types.”

SpareBank 1 priced the deal at 77bp over mid-swaps, tightened from initial guidance of the 77bp-79bp over area. Initial price thoughts on Monday were of the mid-swaps plus 80bp area.

Hegelstad said that, at 77bp over, the issuer had placed the seven year at a very favourable level compared with other Nordic issues this year. Deals from the area have included a Eu500m five year issue by Terra BoligKreditt at 73bp over, a Eu2.25bn long five year issued by Nordea Bank Finland at 65bp over, and a DNB Boligkreditt Eu2bn 5.25 year at 68bp over.

A syndicate official put a SpareBank 1 outstanding March 2017 at around 66bp-67bp on the bid side.

“The new issue premium was below 10bp,” he said, “maybe more around 7bp-8bp.

“Definitely it was a small pick-up the issuer had to pay.”

Germany and Austria took 59%, the UK 12%, Switzerland 10%, the Nordics 7%, the Benelux 7%, France 2%, other 2%, and Italy 1%. Banks were allocated 46%, asset managers 30%, insurance companies 14%, central banks and agencies 8%, and other 2%.