Aktia Bank issued a Eu500m five year covered bond yesterday (Monday), with an official at the issuer noting that the deal gained traction quickly, allaying some nervousness about how it would fare after some softening in the wider market late last week.

Timo Ruotsalainen

Leads Commerzbank, JP Morgan, LBBW and Nordea collected Eu1.1bn of orders for the Finnish bank’s deal, a Eu500m no-grow, and priced it at 8bp over mid-swaps after initial price thoughts of 10bp-12bp over. The deal is Aktia Bank’s second since switching issuance of covered bonds from Aktia Real Estate Mortgage Bank to the universal bank, which brought with it a Moody’s Aaa rating of the programme.

Timo Ruotsalainen, head of treasury at Aktia Bank, said that the deal went “fantastically well”.

“The deal went well, thanks in large part to the lengthy roadshow we carried out beforehand,” he said. “The time on the road allowed us to deepen our investor community.”

The deal gained traction quickly, putting to rest some concerns following a negative turn in market conditions on Friday, according to Ruotsalainen.

“It did not take too much time to get going, with the order book growing rapidly,” he said. “In the morning I was a bit nervous though about how it would proceed as market sentiment seemed to have soured on Friday.”

The latest US non-farm payrolls were released on Friday, and a syndicate official said that the employment figures were solid and “upset the market”, with US equities selling off and Treasury yields falling.

Ruotsalainen said that several factors influenced the timing of Aktia’s deal.

“The decision to go ahead yesterday was based in large part on what we had told investors, and on our desire to get the deal out prior to the Easter holidays and the bank entering its blackout period,” he said, adding that the bank also wanted to issue prior to European parliamentary elections in May.

Aktia Bank announces its first quarter results on 6 May.

The political tension in Ukraine came up regularly in Aktia’s meetings with investors, according to Ruotsalainen, who noted that heightening pro-Russian sentiment in Ukraine had not gone unnoticed, but that “it was difficult to actually know what was going on there”.

“I haven’t seen the situation in Ukraine impacting the covered bond market,” he said. “But it is something that investors are considering. During the roadshow we had lots of question about Finland’s Russian links.”

Ruotsalainen’s views reflected those of a syndicate banker, who yesterday expressed surprise at the market’s subdued reactions to developments surrounding Ukraine.

Aktia has no concrete plans for further benchmark covered bond issuance this year, according to Ruotsalainen, but is “ready and capable” should the need arise.

He said that the final order book for yesterday’s deal was very granular.

Germany and Austria took 54%, the Nordics 12%, the Benelux 9%, the UK and Ireland 7%, Switzerland 6%, Asia 6%, central and eastern Europe 5%, and others 1%.

Banks were allocated 49%, central banks and agencies 29%, funds 19%, and insurance companies and pension funds 3%.