A Eu750m five year covered bond from Cajas Rurales Unidas yesterday (Thursday) outdid a debut benchmark it launched in May on several metrics, its head of IR told The CBR, with the spread, size and foreign demand all bettered on the back of an improvement in conditions in the interim.

Leads Crédit Agricole, Nomura, Santander and Société Générale took more than Eu1bn of orders for what was initially marketed as a benchmark sized transaction for CRU (which is also referred to as Cajamar, one of the banks that was merged into the group).

The deal is CRU’s second benchmark covered bond, coming after a Eu500m three year cédulas hipotecarias launched in early May at 290bp over mid-swaps by the same leads.

At that time the issuer indicated it planned to become a regular issuer and it announced its follow-up on Wednesday.

“Covered bond spreads have tightened in recent months and macroeconomic and financial indicators all pointed to there being good momentum for raising funding in the wholesale markets,” Miguel Gadea Martin, head of investor relations at Cajas Rurales Unidas, told The Covered Bond Report. “Spanish government bond spreads have tightened and, following the measures taken by the government, foreign investors see Spain as a good investment opportunity again.”

CRU’s debut, three year issue widened after Moody’s cut its rating of the cédulas hipotecarias to Ba2 in July, but have since rallied, with Fitch upgrading them from BBB to BBB+ on 9 October. The covered bonds were also assigned a new, BBB- rating from Standard & Poor’s ahead of yesterday’s new issue.

“S&P assigned an investment grade rating to our covered bonds and Fitch also upgraded them, so it was good for investors because the price of our last issue in the secondary market went up,” said Gadea Martin.

He said the issuer was happy with the result of the tranaction.

“We have to bear in mind that our last transaction was a three year and this was a five year, but while the last was Eu500m this was Eu750m, and the spread of the three year was 20bp higher,” he said. “Another positive thing is that more money has come in this transaction from foreign investors than in the last one – 66% of the issue was taken by foreign investors.

“The UK and France are in line with the last issue, but yesterday we saw an increase in money coming from Germany. This is all good news.”

While Spain and Portugal were allocated 38%, Germany and Austria took 16%, Italy 13%, the UK 11%, Switzerland 6%, the Nordics 6%, the Benelux 4%, France 3%, and others 3%. Banks and private banks were allocated 30%, funds 50%, insurance companies 17%, and others 3%.

More than 110 investors participated.

Gadea Martin said that the Eu750m size was what the issuer had been targeting, even if demand was over Eu1bn,while it also opted against taking a smaller amount at a tighter spread, which would have been possible.

“We were comfortable with level because, as I said earlier, it was 20bp less than the last issue in May, also taking into account that it was a five year.”

The ultimate pricing of 270bp over mid-swaps followed guidance of the 270bp area and came after initial price thoughts of the 275bp area.

“We felt the 275bp area gave all the feedback we received the previous day the chance to get involved,” said a syndicate official at one of the leads. “Demand then came in quickly and we could open books at the 270bp ares.”

Gadea Martin said that CRU will not return to the covered bond market this year but could issue in 2014, depending on how market conditions and its funding needs develop.