Erste Group Bank was in the market this (Wednesday) morning with a Eu1bn no-grow 10 year mortgage backed Pfandbrief, the first benchmark covered bond from an Austrian issuer this year.

Leads Barclays Capital, Crédit Agricole, Erste Group Bank and UniCredit began taking indications of interest on the deal yesterday (Tuesday) at 130bp-135bp over mid-swaps, where they set official guidance this morning. The spread has since been fixed at 130bp over.

The leads opened books at 0915 CET and closed them by 1030 CET, with orders of around Eu2bn from more than 120 accounts.

“This will be a tough allocation process, which proves that this was a successful trade,” said a syndicate official at one of the leads. “This is the kind of problem I like to have.”

He said the trade had achieved all its goals, between getting the size the issuer was looking for and pricing at the tight end of guidance.

The syndicate official said that a Eu1bn 10 year deal issued by Erste in January 2011 was trading at around 115bp mid.

“We assumed a new issue premium of 15bp-20bp should be enough to print an Austrian covered bond,” he said, adding that Erste would have to pay a little more than a Nordic bank, for example.

Erste’s last benchmark covered bond was a Eu750m seven year public sector Pfandbrief priced at 55bp over mid-swaps at the end of August 2011. Today’s transaction is the first benchmark covered bond from a euro-zone issuer in more than two weeks.

Syndicate bankers away from the leads were positive about the transaction, with one saying that it offered an attractive yield and that Erste is a solid issuer with good collateral. Others were also positive, with one saying that “it’s not every day that you get a Eu1bn trade from Austria”. Another noted that the market is open to taking risk and that the deal showed there is good liquidity.

An investor suggested that he had some concerns with Austrian paper given the country’s banks’ exposure to central and eastern European countries, especially Hungary, and said that the pricing was wider than what he understood the issuer to have been seeking.