Santander placed a Eu2bn five year cédulas issue yesterday (Monday) that was the first Spanish issue to widen in the secondary market since the reopening of activity in January, according to syndicate bankers, who blamed the performance on the deal being too large.

Leads Banco Santander, Bank of America Merrill Lynch, Barclays, Crédit Agricole and Natixis went out with guidance of the 195bp over mid-swaps area and set the re-offer spread at 195bp over after having collected Eu2.6bn of orders.

A few syndicate bankers away from the leads said that the January 2018 issue widened some 5bp today (Tuesday), trading at 200bp over mid-swaps.

They said that the deal being sized too large was the reason for the underperformance in the secondary market.

“They took way too much out of the market,” said one. “Everything in the periphery is trading pretty well, but there is not a huge amount of juice in the oversubscription on Santander’s deal.”

Another said that printing at Eu2bn was a “wrong, wrong move”

“They should have done just one or one and half billion, and the bond would have improved in the secondaries,” he said. “That bond would be trading at 190bp today.

“Unfortunately for them it is trading at 200bp,” he added.

He said that Santander’s trade has been the only issue from Spain this year whose spread has not tightened during deal execution or in the secondary market.

Banco Popular Español, Banco Sabadell, Bankinter and Kutxabank came to market in the first three weeks of January, pricing their cédulas issues some 10bp-20bp inside initial price thoughts.

A banker at one of the leads acknowledged that a more appropriate size for the issue would have been Eu1.75bn, which would have allowed Santander to obtain a slightly tighter price and a better performance in the secondary market, but that the round number of Eu2bn looked more appropriate, and the deal size was ultimately the issuer’s decision.

“They still collected Eu2.6bn of orders,” he said. “Long term investors will be happy to hold the paper.

“The issue might underperform in the secondary market now, but it will be better in a couple of days,” he added. “It can only improve.”

The banker also highlighted how the deal confirmed the trend of cédulas attracting an increasing amount of international investors, which he said started in November last year.

“Each time we open the books, we have five to six new investors bidding for a Spanish issue,” he said.

“This is because foreign investors are realising that beyond all the troubles, Spanish names are very good entities,” he said. “And yes, they also offer good returns.”

According to statistics from the issuer, Spanish investors were allocated 12%. This is one of the lowest shares in recent cédulas issues if compared, for example, with a 32% share taken by Spanish accounts in Bankinter’s deal, 26.9% for Banco Sabadell and 24% for Banco Popular Español on14 January.

Germany and Austria took 32%, France 18%, the UK 17%, the Benelux 9%, Portugal 4%, Italy 2%, Switzerland 2%, the Nordics 1%, and others 2%

Fund managers were allocated 47%, banks 41%, insurance companies and pension funds 10%, and others 2%.

Santander was unavailable for further comment.