AIB Mortgage Bank is pricing a nearly five times oversubscribed Eu500m no-grow seven year covered bond today (Wednesday), with the deal coming inside the issuer’s interpolated curve and building on strong interest in Irish debt, according to bankers on the deal.

Leads Barclays, Commerzbank, Danske, HSBC and Société Généralé built an order book of Eu2.4bn for the Eu500m seven year deal, which opened with guidance at 96bp-98bp over mid-swaps. The spread was then tightened and fixed at 95bp over, with orders at that stage amounting to more than Eu1.8bn. No accounts were lost after the spread was fixed, and the order books continued to grow, said a lead syndicate official.

Syndicate officials on the deal put fair value at 96bp over.

“We skipped IPTs and opened books immediately with guidance of 96bp-98bp over,” said one. “There is a lot of interest in Ireland and AIB, and this was an outstanding transaction.”

The issuer had the market to itself today, after Deutsche Pfandbriefbank (pbb) and National Bank of Canada sold new issues yesterday (Tuesday). DG Hypothekenbank priced a Eu125m September 2018 floating rate mortgage Pfandbrief at 7.5bp over three month Euribor today via sole lead UniCredit.

Today’s deal for AIB comes after Moody’s upgraded all Irish mortgage backed covered bonds on Thursday following a change in the anchor point it uses to rate covered bonds. AIB Mortgage Bank’s Asset Covered Securities (ACS) were upgraded from Baa2, on review for downgrade, to Baa1.

Syndicate officials on today’s deal said that fair value calculations took into account a September 2018 issued by AIB trading at 86bp over in the secondary market, with the secondary market curve of Bank of Ireland covered bonds, focussing on 2018-2020 maturities, also a factor.

At 95bp over, AIB’s covered bonds are coming some 5bp back of Irish government bonds, according to bankers on the deal.

Syndicate officials away from the leads said that the deal appeared to be a success, and suggested the pricing and maturity choice was as to be expected. A syndicate banker away from the deal said that it was the “right way” to follow a Bank of Ireland transaction and “build on momentum” behind Irish debt.

Via the National Treasury Management Agency Ireland on Thursday raised Eu1bn in its first bond auction since September 2010. Bank of Ireland Mortgage Bank issued a Eu750m five year benchmark covered bond last Wednesday (12 March) on the back of more than Eu2.2bn of orders. A syndicate official on today’s deal for AIB noted that Bank of Ireland’s deal was priced at 80bp over, inside fair value of 81bp over.

“Today’s deal did the same as Bank of Ireland, providing demonstrable oversubscription to come inside the interpolated curve,” he said.

AIB had last issued a covered bond in September, a Eu500m five year priced at 180bp over on the back of a Eu650m order book.