CaixaBank kicked off its 2014 issuance programme with a Eu1bn 10 year covered bond on Tuesday, and an official at the issuer said it did not need the funding but “has to be present” and wanted to offer some liquidity.

The Eu1bn 10 year deal, a cédulas hipotecarias issue, is only the second Spanish benchmark covered bond this year, after a Banco Mare Nostrum debut in early January. Leads CaixaBank, Crédit Agricole, HSBC, JP Morgan and UBS priced CaixaBank’s deal at 80bp over mid-swaps on the back of more than Eu2.6bn of orders.

A CaixaBank funding official said that the issuer is in a very strong liquidity position and did not need the funding.

“We are one of the biggest recurring covered bond issuers in Spain and we have to be present,” he told The Covered Bond Report. “We also wanted to offer some liquidity at a strategic point of the curve, due to the fact that the secondary market liquidity is limited.”

CaixaBank, which is Spain’s largest bank by domestic market share, has an “excellent” liquidity position, the bank said in a statement, standing at Eu60.76bn at the end of 2013, representing around 17.9% of assets.

The funding official said that the bank is deleveraging, a trend in the Spanish banking sector, but that on the liability side it is growing retail deposits and therefore generating sufficient liquidity from its balance sheet to meet redemptions of publicly placed bonds.

An analyst noted that CaixaBank last year increased its deposit base by 4.4%, and that its loan-to-deposit ratio improved, from 128% in 2012 to 110% in 2013.

“Together with a liquidity position of Eu61bn, the bank is in a rather comfortable position funding/liquidity wise and has been reducing ECB funding by cancelling out retained cédulas in the past months,” he said.

The mortgage-backed covered bond is CaixaBank’s first visit to the public wholesale funding markets this year, after it last year raised Eu3bn via senior unsecured issuance and Eu1bn via a cédulas hipotecarias deal in January 2013, and also issued Eu750m of subordinated bonds and a Eu594m issue of bonds exchangeable for stock in Spanish oil company Repsol.

The CaixaBank bank official said that the issuer monitors the market closely, and that the timing of its deal was linked to market conditions.

“There were no surprises,” he said. “We know our investors well and the outcome was as expected.”

“For foreign investors that are wanting to diversify it is a very good opportunity as there is not much supply offering 80bp over mid-swaps,” added the bank official, pointing out that 88% of the bonds went to international investors.

Pricing of 80bp over was what the issuer had been targeting, according to CaixaBank.

The leads announced initial price thoughts of the high 80s over alongside the mandate early on Tuesday morning, and were able to set official guidance at the low 80s over given a strong response to IPTs, according to a syndicate official at one of the leads.

The deal is CaixaBank’s first 10 year cédulas since 2007.

Spain’s government last week proposed an amendment to the country’s securitisation law that is being seen as paving the way for a new type of covered bond in Spain, which would facilitate conditional pass-through (CPT) structures and allow SME loans as collateral.

Asked about this development, the CaixaBank official said that “reinforcing issuers’ capabilities to monetise their balance sheets” is always welcome.

“It is good to look to the future to have a wide variety of products,” he said.

However, he placed the development in the context of a potential longer term move toward harmonisation of the European covered bond market.

The type of covered bond that is seen as being possible under the government’s proposed legal change would be one where an issuer earmarks a specific pool of assets to secure the covered bonds rather than commit their entire balance sheet. The latter is a feature of cédulas, and differentiates them from covered bonds in other jurisdictions.