Banco Espírito Santo is bringing the first Portuguese benchmark FIG supply in more than two years today (Wednesday), with bankers putting the choice of a senior unsecured deal down to considerations about collateral and relative pricing benefit, but one noting that covered bonds should still be an option.

The Portuguese bank is said to have met with more than Eu2bn of orders for a three year trade that leads Espirito Santo Investment Bank, Morgan Stanley, JP Morgan and UBS initially pitched at a yield of 6.25% before revising this to 6.125% plus or minus 0.125%.

“It’s an absolute blowout,” said a syndicate banker away from the leads. “It’s very impressive.”

The last Portuguese benchmark FIG supply is understood to have been in March 2010, when Millennium bcp tapped the senior unsecured market and Banco Santander Totta sold a Eu1bn three year covered bond, at 85bp over mid-swaps. Portuguese corporates have issued this year, with Portuguese financial institutions otherwise only active in the market via tender offers.

A syndicate banker said that a covered bond would seem the obvious trade to reopen the Portuguese FIG market with, but not if the relative pricing benefit over a senior unsecured transaction does not sufficiently reward the collateral used in a covered bond. Another said that BES’s senior unsecured transaction did not have any immediate knock-on effects for the Portuguese covered bond market.

“There will be buyers, but it’s more an issue of what spread issuers are willing to pay and collateral availability,” he said.

According to Crédit Agricole analysts, in Portugal the average covered bond spread as a percentage of senior unsecured levels is around 80%, compared with less than 5% for Germany, for example. The percentage in Spain, the last peripheral jurisdiction to have spawned a new covered bond, via Bankinter in the middle of October, stands at around 70%, according to the analysts. The lower the percentage the more attractive covered bonds are as funding tool for issuers.

Still, another banker said although pricing is likely to mainly be reflecting Portuguese risk rather than any incremental risk or benefit involved in doing either a senior unsecured issue or covered bond, the choice between the two is not a “no-brainer”.

“It’s very clear that the market is open,” he said, “and that it’s a matter of choice between covered bonds and uncovered.

“I wouldn’t be surprised if someone came to a different conclusion.”

However, he does not anticipate much euro benchmark covered bond supply in the near-term, despite heavy redemptions, including in government bonds, and said that any issuance is likely to primarily come from those issuers who have not had market access until now or those looking to prefund.