Bankinter launched the first Iberian covered bond of the year today (Thursday), a Eu500m no-grow three and a half year deal that came well inside government bonds following strong demand on what some bankers said was a “hot day” for the Spanish bond market.

Leads Bankinter, Barclays, BBVA and Société Générale collected more than Eu3bn of orders for the transaction, tightening the spread from initial price thoughts of the 245bp over mid swaps area to 220bp over.

“It’s a pretty amazing result for Bankinter,” said a syndicate banker away from the leads. “The level they are coming through Bonos is amazing, too.”

A lead syndicate banker said that at 220bp the deal was priced significantly through government bonds, around 50bp inside Bonos, with a syndicate official away from the leads seeing it at 35bp through.

Bankinter is the first Spanish issuer to launch a covered bond deal this year, with others such as BBVA and Banco Popular Español having preferred to go for unsecured funding given strong market conditions in the first full week of trading after the holiday break.

Bankinter last hit the market on 18 October when it issued another Eu500m no-grow that was also six times oversubscribed, being priced at 335bp over mid swaps.

“In a relatively short period they are bringing a new issue at around 100bp tighter, which tells you how far spreads have improved since then,” said a syndicate banker away from the leads.

He added that the choice of maturity was also appropriate considering that Bankinter is not among the strongest peripheral names.

“There continues to be a good appetite for anything relatively short dated,” he said. “Anything from three to five years is working well, especially for second tier issuer names.”

The positive outcome of the deal shows that there is strong interest in the market for Spanish names, said market participants. One syndicate banker said that today was a “hot day” for peripheral markets, Spain in particular.

“There was a Spanish government bond auction this morning that went very well, and that has brought a lot of positive sentiment towards the Spanish market,” he said. “We have seen a strong rally of all secondary levels in terms of recent Spanish supply.”

He added that Bankinter had been rewarded for a well-timed transaction.

Market participants also said that the deal give a positive signal for covered bond issuance away from core jurisdictions.

“It’s a great result for Bankinter, but also for the peripheral market overall,” said a syndicate banker away from the leads.

A lead syndicate official said that more supply and demand is definitely expected.