UniCredit Bank Austria yesterday (Wednesday) sold only the second Austrian benchmark covered bond this year, with the strength of demand for its issue boding well for further supply from the country, according to a funding official at the issuer.

Leads BayernLB, Danske Bank, Deutsche Bank and UniCredit priced a Eu500m no-grow seven year public sector backed deal at 88bp over mid-swaps, the tight end of guidance of 88bp-90bp over, revised from the 90bp over area. This in turn followed initial price thoughts of the low 90s.

Marco Pidancet, director, covered bond syndicate at UniCredit, said that Bank Austria decided to proceed with a deal, its first benchmark of the year, after Germany’s Helaba priced a new issue on Tuesday. That also came with a seven year maturity, but Pidancet said the maturity of Bank Austria’s deal was chosen because it was a good fit for the bank’s redemption profile.

Drawing just over Eu1bn of orders from nearly 100 accounts the deal was very successful, he said.

Gabriele Wiebogen, head of funding at UniCredit Bank Austria, said that the issuer is pleased with the transaction, including the pricing, and that it was surprised by the strength of demand.

“That was very positive,” she said, “and shows that after only the second Austrian benchmark this year investors would be happy to see more.”

The only other Austrian issuer to have tapped the market this year is Erste Group Bank, which sold a Eu1bn 10 year at the beginning of February.

Another positive aspect of Bank Austria’s transaction, added Wiebogen, was the participation by accounts new to the issuer’s benchmark offerings.

“That is always a bonus,” she said, noting that the number of new accounts was considerable, and they came from the Nordic area and Germany.

Germany was allocated 56%, Austria 15%, the Nordics 14%, the Benelux 7%, Italy 5%, France 2%, and others 1%. Funds took 47%, banks 29%, central banks 13%, insurance companies 10%, and others 1%. The 13% central bank take-up reflects participation under the second ECB covered bond purchase programme, according to Pidancet.

The issuer had been monitoring the market for some time with the aim of being in a position to launch a deal should an issuance window manifest itself, and felt there was an opportunity after Helaba reopened the market on Tuesday, she said.

“We are pleased with this, in particular given that issuance windows are not that plentiful,” she said, adding that the issuer will soon have to enter into blackout ahead of announcing first quarter results on 10 May.

UniCredit Bank Austria is a wholly-owned subsidiary of Italy’s UniCredit, but Pidancet said that pricing of yesterday’s deal was not materially affected by a recent increase in peripheral sovereign concerns.

“The group has three clear euro covered bond platforms providing investors with full transparency, and they can choose between German, Austrian and Italian collateral,” he said. “Many investors have allocated credit lines for the UniCredit group, so the Italian context is certainly there,” he said, “but in this particular trade it did not have any material impact.”

He added that the leads would have priced the deal at a similar level whether February 2019 BTPs were trading at around 230bp or the 300bp-310bp level at which they are now.

However, he said that Bank Austria covered bonds trade some 10bp-15bp wider than paper from Austrian peer Erste Group Bank in the belly of the curve.