Banco Sabadell built on a reopening of the Spanish market by Santander last week to launch a three year cédulas this (Monday) morning that demonstrated support for second tier names, while BPCE launched a five year benchmark in contrast to recent heavy French supply at the long end.

With leads Bank of America Merrill Lynch, Deutsche Bank, Natixis and Nomura, Sabadell started taking indications of interest this morning at the 255bp over mid-swaps area. The books were opened with initial guidance at that level, and the spread was fixed at the low end of guidance, at 250bp over.

By 1100 CET orders were over Eu800m, and by the time the books were closed at 1245 CET demand was around Eu1.5bn. A syndicate official at one of the leads said the size was undecided by the time The Covered Bond Report went to press, but that Eu1bn was likely.

The deal follows a Eu2bn three year cédulas for Santander last Wednesday that was the first cédulas in eight months. Santander’s leads built a book of around Eu8.5bn, but syndicate officials away from the Sabadell deal did not expect such an oversubscribed book today.

“Santander last week was complete madness,” said one, “but Santander is always a completely different animal from other issuers.”

Another said that the extent of the positive reception for Santander’s deal spoke against there being a “careful pecking order”, and that demand is there for cédulas in general. However, he said that there is a “huge” difference in the credit quality between both Santander and BBVA as the top two Spanish banks and the next ranking issuers.

He added that a lesser reception for Sabadell’s deal compared with that for Santander is in line with the pattern that was seen for benchmark Spanish supply in 2011, and that the order book for Sabadell’s deal is likely to be very different to that for Santander’s transaction, with less international demand.

Another syndicate banker said he did not expect the same momentum for Sabadell, but that it should go well. He said Sabadell had been an unlikely candidate as the next Spanish issuer as most market participants had expected a trade from BBVA.

“It’s definitely not a quality issuer like Santander,” he said, “but it’s going out about 45bp wider than Santander, so I think that’s fair.”

Santander priced its issue at 210bp over mid-swaps, after early thoughts of the 230bp area. That was said to be at 190bp mid this morning.

A syndicate official away from Sabadell’s leads said it was difficult to say whether the pricing was right. Sabadell’s last benchmark was a Eu1.2bn two year at 260bp over in February 2011.

“Anything in three years is going to work,” said another banker.

Market participants said a five year issued by BPCE SFH reflected a logical move for French issuers into medium term maturities.

“It’s a logical step for the French,” said a syndicate official away from the leads. “Now we will start seeing more French covered bonds in the medium term maturities.”

With the exception of a four year tap from CFF, all six French benchmarks since the start of the year have been in maturities of 10 years or longer.

BPCE’s spread has been fixed at 120bp over, the tight end of initial guidance of a 125bp-130bp over range that was subsequently revised to 120bp-125bp. Leads Crédit Agricole, Danske, LBBW, Natixis and UniCredit closed books at 1145 CET, with orders in excess of Eu1.75bn.

A syndicate official away from the leads put the new issue premium at 10bp-15bp, “which is OK”.

Another said the price looked reasonable to slightly tight.

“I think the price should be OK,” he said. “There are basically no mispriced covered bonds these days.”

A syndicate official said he believed the momentum in issuance would pick up again.

“We’re out of blackouts now,” he said. “We will see issuance increase again, although maybe not so quickly.”

Australian issuer Westpac completed a roadshow on Thursday.

“Westpac is interesting, but I haven’t heard anything about the level,” said a syndicate official.