Commerzbank and Mediobanca provided benchmark covered bonds at different ends of the spread spectrum today (Thursday), with Commerzbank making a neat job of an inaugural mortgage Pfandbrief and Mediobanca making a rare debut in the 10 year maturity.

Mediobanca’s deal is its inaugural benchmark covered bond and the third from Italy this week, coming after obbligazioni bancarie garantite (OBG) issuance from UBI Banca and Banca Popolare dell’Emilia Romagna (BPER) on Monday and Tuesday, as well as a Eu5bn seven year syndicated benchmark for the Italian sovereign yesterday (Wednesday). An auction of Italian government bonds is scheduled for tomorrow to add to the heavy supply from the country this week.

Leads Barclays, Commerzbank, Mediobanca, Société Générale and UniCredit launched the issue this morning, with a banker on the deal saying today was the only window of the week for the issuer to avoid competing supply from Italy.

More than Eu1.7bn of orders had been placed for the 10 year mortgage backed issue before the order books were due to close at 1320 CET. The latest guidance before The Covered Bond Report went to press was 150bp-155bp over mid-swaps, revised from 155bp-160bp over. Initial price thoughts had been set at 160bp-165bp over.

A banker away from the deal drew attention to the spread movement on the deal, suggesting it would raise eyebrows among some investors.

A banker on the deal was positive about the execution.

“We’re very happy with it,” he said, claiming that Mediobanca is the first Italian issuer to debut with a 10 year maturity. The long dated maturity is indeed an unusual one for inaugural issuance from any jurisdiction, core or non-core.

The banker said that the issuer is one of the highest rated Italian banks alongside Intesa Sanpaolo and UniCredit, and that it wanted to take advantage of the possibility to raise long term funding at the tightest level possible. The covered bonds are rated A by Standard & Poor’s. [Rating corrected].

At the latest guidance range of 150-155bp over, the deal would be coming 55bp-50bp through BTPs, the banker added.

A syndicate banker away from the leads said 10 years was a “punchy” choice. Indications of interest in excess of Eu1bn gave him the impression that the deal was “not knocking the doors off”, but he said securing 10 year funding at prevailing levels was sensible. He said 10 year BTPs were at around 200bp this morning and that Mediobanca’s issue is therefore “a fair number through” the sovereign. Italian majors’ covered bonds are trading around 100bp inside BTPs, he added.

Another syndicate official away from the leads wondered whether the issuer had opted for the 10 year maturity to differentiate itself from UBI Banca’s and BPER’s issuance (in seven and five years, respectively).

“It doesn’t look as easy as UBI and BPER,” he said, “being the third issuer and the sovereign coming tomorrow, but I’ll withhold judgement. If it goes well it will be good.”

Intesa and UniCredit OBGs were at around 130bp-125bp in 10 years, he added.

Mediobanca finished an OBG roadshow last Friday.

Commerzbank in debut hat-trick

Commerzbank has priced a more than twice-subscribed Eu500m no-grow seven year issue flat to mid-swaps in what is its third covered bond debut of the year.

Commerzbank entered the market with its first benchmark mortgage Pfandbrief this morning after announcing the mandate yesterday (Wednesday) afternoon. It is the German issuer’s third covered bond debut this year, after a Eu500m SME backed structured covered bond in February and Eu500m five year inaugural benchmark public sector Pfandbrief in June.

Today’s Pfandbrief is Commerzbank’s second under its own name in benchmark format, with the group having previously used Pfandbriefe via Eurohypo, now Hypothekenbank Frankfurt, which is being wound down.

Leads Commerzbank, Deutsche Bank, Natixis and UniCredit priced the new Eu500m no-grow seven year issue at mid-swaps flat on the back of more than Eu1.2bn of orders. Initial price thoughts were mid-swaps plus the mid-single-digits and generated more than Eu1bn of orders, with official guidance set at mid-swaps flat to 1bp over.

Syndicate officials away from the leads said the pricing looked sensible, with one saying the new issue premium was minimal, maybe 1bp-2bp. Another said that with the Eu500m no-grow size “there was always going to be a bun-fight” for the deal.

The mortgage Pfandbriefe are rated Aa1 by Moody’s and AAA by Fitch.