Bank of Ireland was inundated with orders for a May 2017 mortgage ACS today (Wednesday), with a triple-digit spread and short maturity seen appealing to investors. It is the issuer’s third benchmark covered bond of the year and the first Irish issue to reach Eu1bn in 2013.

The three-and-a-half year transaction comes not long after Bank of Ireland Mortgage Bank sold a Eu500m seven year issue, at 195bp over mid-swaps, on 25 September. The issuer also priced a Eu500m five year asset covered security (ACS) in March. That was priced at 190bp over, and was said to have tightened to the low 130s, mid.

Today’s deal is the only new issue in euro benchmark covered bonds, while Sparkasse Hannover has mandated for a Eu100m minimum five year public sector Pfandbrief that is understood to be the issuer’s first public covered bond.

The senior unsecured market is much busier, with the corporate and SSA markets also active. Banco Popular Español is one of several issuers out with a senior unsecured deal after much talk of Spanish issuers making a return to the funding markets given tighter spreads, with Australian, Austrian and French supply also on offer.

“The senior market is wide open,” said a syndicate banker, adding that spreads are quite tight relative to covered bonds and that it made sense for issuers to try to take advantage of the comparatively cheap funding.

On Bank of Ireland’s deal, leads Credit Suisse, HSBC, Lloyds Bank, Natixis and UBS went out with initial price thoughts of the 130bp over area for today’s transaction, with some Eu2.5bn of orders having been placed by the time guidance was set at the 125bp over area, according to a syndicate banker on the deal.

The leads will price a Eu1bn deal at 120bp over on the back of a final order book that is understood to be considerably larger than the last update of Eu2.5bn that was available at the time of publication. [Update: the final order book was in excess of Eu3.6bn, according to a lead syndicate banker.]

Syndicate officials away from the leads were positive about the transaction, with one hailing it as “fantastic”.

“It’s a no-brainer,” she said. “It’s a great order book, investors are hungry for yield, for spread, three-and-half years is a very safe maturity, and the level is fair.

“It ticks all the boxes.”

The market overall is in very good shape, she added, with high beta supply outperforming.

Another syndicate official away from the transaction said that the 130bp over area was a somewhat cheap start, but that the re-offer spread was uncontroversial. He put Bank of Ireland’s March 2018s at 138bp over, bid, and November 2015s at 83bp over, putting fair value in the high 110s. The new issue is coming some 20bp back of the Irish sovereign, he added.

According to the lead syndicate official the spread of 120bp incorporated a new issue premium of around 5bp, with an extrapolation of the issuer’s curve pointing to fair value at 115bp over.

Large spread tightening moves from initial price thoughts to final pricing have come in for criticism from some investors recently, but a syndicate official away from the deal noted that on a percentage basis the move from 130bp over to 120bp on Bank of Ireland’s deal was not big and therefore not problematic.