SpareBank 1 priced a Eu1bn long six year issue on Tuesday to fulfil its plans to return to the benchmark covered bond market after the summer, but the outcome of the deal was surprising for the issuer, which had expected a bigger take-up, its CEO told The CBR.

The January 2020 deal was priced at 15bp over mid-swaps, the middle of guidance of the 15bp over area and initial price thoughts of the mid-teens. Barclays, DZ Bank, HSBC, and ING were lead managers.

Demand fell short of expectations for the issue, however, with end investor demand failing to cover the size of the deal, according to syndicate officials away from the leads. The last official update about the level of demand was that orders were around Eu800m.

Arve Austestad, chief executive of SpareBank 1 Boligkreditt, said that the outcome of the deal was surprising for the issuer and the leads.

“It did not go as we had expected,” he told The Covered Bond Report. “The demand was OK, but not what we were aiming for. The accounts in the book were of high quality, but we wanted a bigger number.”

Some syndicate officials said that the maturity of the deal was to blame for the limited demand, with investor fatigue – for tight spreads and Nordic supply – also cited as contributing factors.

Austestad said that the issuer went into the transaction with the understanding that demand in the five to seven year maturity range was good, with the January 2020 maturity having been chosen for asset-liability management reasons.

“In hindsight maybe that was the reason, but there have also been three Nordics in three weeks, so that may be one of the main reasons,” he said.

The deal is SpareBank 1’s second euro benchmark this year, with the issuer having planned to return to the market after the summer, according to Austestad.

“It covers our funding requirements for the coming months,” he said.