Banco Popular Español sized a Eu600m five year cédulas issue at a tight level yesterday (Wednesday) despite facing headwinds in the form of a sell-off of Spanish government debt, said a syndicate official at one of the leads, while an official at the issuer told The Covered Bond Report he expects the deal to perform.

Leads BNP Paribas, Citigroup, Crédit Agricole and Deutsche Bank gathered more than Eu600m of orders for the transaction, the issuer’s first new issue since January 2011, and priced the deal at 255bp over mid-swaps.

This represents the tight end of guidance of 255bp-260bp over, with a syndicate banker at one of the leads putting the re-offer spread at flat to secondary levels.

An official at the issuer said that there was some interest in supply from the issuer and that it wanted to respond to this and provide some liquidity, noting that secondary market levels are hard to assess given illiquidity there.

He said that market conditions were very constructive in the morning when the deal was launched, but deteriorated as the day progressed.

“Unfortunately the market did not help,” he said, “but we think the transaction is well placed and will perform.

“We had a clear objective to prioritise spread over size,” he said, “and to add a benchmark to our curve.”

A syndicate official away from the leads said the issuer had obtained a good outcome given that the transaction was priced on a day when Bonos widened sharply, a point also made by a syndicate banker involved in the deal.

The latter said that the deal came at a very tight level despite “headwinds” posed by a significant sell-off of Spanish government bonds. Bonos widened by around 25bp versus Bunds and 24bp versus swaps in five years yesterday, he said, with the timing of these moves skewed towards the afternoon.

BPE’s deal was around re-offer today, he said.

A syndicate banker away from the leads said the distribution of the cédulas issue looked “quite healthy”.

Spain took 36%, Germany 22%, Portugal 10%, France 7%, UK 6%, Finland 5%, Switzerland 5%, the Benelux 4%, Asia 3%, and Italy 2%. Banks were allocated 37%, funds 25%, central banks 23%, insurance companies 7%, and others 8%.