Bankia took euro benchmark covered bond issuance into uncharted single-A waters today (Wednesday), while Barclays Bank is tapping a sterling issue and two issuers mandated roadshows in an increase to primary market related covered bond activity.

Leads Bankia, Bank of America Merrill Lynch, Credit Suisse, Natixis and Nomura marketed a Eu500m two year issue with initial guidance set at the 290bp over mid-swaps area this morning. They are understood to have built a book of Eu350m within 45 minutes of opening books and Eu500m by 1200 CET.

A syndicate official at one of the leads said orders were around Eu700m when books were closed at 1300 CET.

A syndicate banker away from the leads said the pricing looked tight compared with secondaries. He put a Bankia February 2014 at 285bp on the bid side and a March 2014 at 295bp.

“But they’re only trying to do Eu500m,” he added, “and I’m sure they had interest already.”

The lead syndicate banker said the trade had been priced at mid-market relative to secondaries and another away from the leads said that he viewed the pricing similarly.

He suggested that the transaction would be driven by domestic accounts and central banks given the issuer’s credit story.

Bankia’s cédulas hipotecarias are rated A2 by Moody’s and AA by Standard & Poor’s, with each having a negative outlook on their rating. S&P downgraded its rating only yesterday (Tuesday), from AAA (see separate article). Moody’s downgraded Bankia’s cédulas hipotecarias from A1 to A2 on Thursday. The issuer is rated BBB- by S&P, Baa3 by Moody’s, and BBB+ by Fitch.

A covered bond analyst said that a successful Bankia transaction could encourage other non-triple-A issuers to tap the euro benchmark covered bond market, although he qualified this by noting that “a two year is probably not telling the truth in a three year LTRO environment”.

Aareal Bank, Banco Sabadell, Deutsche Pfandbriefbank, and Terra BoligKreditt have sold double-A rated euro benchmark covered bonds this year, according to the analyst.

“Given that the rating downgrade trend is anything but over, non-AAA covered bonds may increasingly tap the market (assuming that regulators push respective issuers to not become fully ECB dependent),” added the analyst.

A syndicate banker away from the leads was sceptical about the likelihood of “a critical mass of investors” getting behind single-A rated covered bonds, with the underlying issuer rating also an important consideration.

“I would have thought it would be challenging,” he said. “Going forward who knows, but right now, the market moves in small steps.”

Another syndicate official away from the leads said the Bankia transaction is not driven by the pricing, but rather by the limit investors have for the name.

“Bankia is a result of a merger between a couple savings banks,” he noted, adding that credit lines rather than pricing were more relevant to the deal’s development.

Bankia was formed in December 2010 by a merger of seven Spanish financial institutions, including Caja Madrid and Bancaja.

A banker also said investors could have a problem with the name in general, but said the trade had gone well.

“The two year maturity in general is very attractive,” he said.

But a banker away from the leads said a two year covered bond should get a lot more traction than Bankia had gotten.

“This trade was definitely not an easy task,” he said.

The lead syndicate official acknowledged that the transaction had been a different animal from a Eu2bn three year Santander cédulas benchmark that reopened the Spanish market on 1 February.

“Santander got an Eu8bn-plus order book,” he said. “Bankia did not.”

Barclays Bank was also in the market this morning, with a £300m minimum tap of a January 2015 issue. The issuer set initial guidance at the 135bp over three month Libor area, with Barclays Capital the sole lead. A syndicate banker away from the deal saw the tap coming flat to secondaries.

ING-DiBa is going on a roadshow, with leads BNP Paribas, Commerzbank, ING and LBBW. A syndicate official at one of the leads said the roadshow will most likely start next week, though details are still being finalised.

“We wanted to capitalise on a good market,” he said, “and we wanted to engage with investors and get some feedback from them. Even with a difficult market backdrop, I would expect to maybe see ING-DiBa in the week after the roadshow.

A syndicate official away from the roadshow said the issuer could come with a five year deal.

“A Eu500m June 2016 is its only outstanding bond, so I can imagine that it will come with a five year, a maturity that could fit,” he said. “I don’t think it will come at the long end because the actual spread levels on German Pfandbriefe are too tight in the long end to attract investors.”

Some market participants expected more issuance in the coming days.

“Market sentiment is still positive and there is still a need for primary issuance,” said one. “It is only a matter of time before the flood resumes.”

Yorkshire Building Society is planning a roadshow to update investors in connection with its annual results and, according to a spokesperson for Yorkshire, will decide on any transaction after the roadshow, taking into account feedback and market conditions. The week long roadshow, being held with HSBC, starts on Monday and will take in continental European and UK accounts.