Sparebanken Vest Boligkreditt yesterday (Tuesday) priced the tightest Norwegian benchmark this year, a Eu500m long five year deal, on the back of a three times oversubscribed order book, and an official at the issuer cited scarcity value as part of its appeal.

Leads Commerzbank, DZ Bank, ING and Nordea fixed the price at 66bp over mid-swaps on the back of a Eu1.5bn book comprising more than 110 accounts. This followed guidance of the 68bp over mid-swaps area after the leads took indications of interest on Monday on initial price thoughts of the 70bp over area.

“We have scarcity value,” Egil Mokleiv, managing director at Sparebanken Vest Boligkreditt, told The Covered Bond Report.

“We have issued one Eu500m transaction each year over the past three years, so that’s probably the reason we are able to price at quite attractive levels compared with the larger players.”

He noted that the issuer also had the smallest triple-A rated covered bond programme in Norway.

“The pricing was quite attractive compared to DNB,” he added.

DNB Boligkreditt came to the market on 4 January with a Eu2bn five year at 68bp over.

A syndicate official at one of the leads said secondaries did not act as a good pricing reference, given that the market was getting less liquid.

“We looked at recent primaries and added something like 3bp-4bp,” he said. “There was the sense we had to add a bit because the issuer is less known.”

The syndicate official compared the trade with a Nordea Finland 5.5 year priced at 65bp over on 10 January.

“We assured the issuer from the beginning that the trade would price in the 60bp camp,” he added.

Mokleiv said the transaction had gained good traction from the start.

“Even before books opened yesterday we had Eu800m-Eu900m in investor interest,” he said.

The books were opened at 0915 CET and were closed after one hour with an order book of Eu1.5bn.

The lead syndicate official said allocation was “a bit of a bloodbath”, with so many investors involved.

“We felt that we could price tighter than 66bp over,” he said, “but that might have offended come investors, and we would rather leave a basis point or two on the table for the investors to get some performance.”

Mokleiv said the issuer chose to launch a deal now because yesterday the market looked quite good.

“We have to do funding this year and it’s good to get started early,” he said, adding that the long five year maturity had fitted with Sparebanken Vest’s maturity profile.

“Covered bonds are also cheaper funding for us, and since 70% of our loan book is in the retail sector, and 95% of that is mortgages, this allows Sparebanken Vest to issue a strong volume of covered bonds backed by prime Norwegian residential mortgages,” he added.

Germany took 41%, Nordics 26%, Switzerland 5%, Austria 5%, the UK 2%, the Benelux 6%, southern Europe 10%, Asia 4%, and others 1%. Banks were allocated 49%, asset managers 22%, insurance companies/pension funds 14%, and central banks/agencies 15%.