Banca Popolare di Sondrio is pricing an inaugural, Eu500m five year OBG today (Tuesday), with the decision to launch the covered bond via only one lead and without a roadshow seen as odd by some bankers but defended by a lead syndicate official. (Distribution statistics added.)

The Italian issuer will price a Eu500m no-grow five year obbligazioni bancarie garantite (OBG) issue at 75bp over mid-swaps, the tight end of guidance of 75bp-80bp over, after sole lead BNP Paribas gathered more than Eu1bn of orders.

The deal is Sondrio’s first benchmark covered bond, and comes after the issuer yesterday (Monday) announced that it had mandated BNP Paribas and Finaziaria Internazionale as structurers and arrangers for a Eu5bn programme backed by Italian residential mortgages. Fitch yesterday assigned an expected A rating to the bank’s covered bonds, on negative outlook. The bank is rated BBB by Fitch.

The deal is the first benchmark covered bond in just over a week, coming after Toronto-Dominion Bank made its legislative and euro debut, and the first from an Italian, and any peripheral issuer, since Banca Monte dei Paschi di Siena sold a Eu1bn 10 year OBG at 148bp over mid-swaps on 8 July.

One syndicate banker away from Sondrio’s deal said the level appeared tight, but several syndicate officials away from the transaction were mainly focussed on, and puzzled by, the execution thereof, specifically the choice of only one lead manager and the apparent decision to eschew a roadshow.

One said that he did not understand why only one bookrunner was appointed, noting that it means the bonds will not be index eligible and that secondary market liquidity will be limited as a result, and another said it was “very bizarre”.

Some syndicate officials were also seemingly surprised by the emergence of a deal so soon after the programme mandate was announced, with several having said that they expected the issuer to go on a roadshow first.

“To me it sounds like a name that needs a roadshow,” said one. “When was the last time a debut issuer didn’t go on a roadshow?”.

Others also said they assumed the issuer would go on a roadshow first. One had yesterday afternoon said that he thought a deal would emerge in a few weeks’ time. However, he mentioned the possibility of it coming without a roadshow, saying that those involved would be exploring such an option.

A syndicate banker on Sondrio’s deal said that it was launched without a roadshow because it was felt that demand for covered bonds and the market backdrop were sufficiently strong to skip this step.

“We took a bit of caution by going over a two day process,” he said, “but we felt that the appetite for this product is strong enough that you can put it on the tapes and it works, and it did.”

The market backdrop for covered bonds in general is positive at the moment, he added, and Italian government bonds and OBGs have tightened considerably in the past few weeks.

He played down the importance of index eligibility, and said that having only one bookrunner can benefit the price discovery process, making it easier to get a handle on investors’ views on pricing.

“I think today’s deal shows that having multiple leads isn’t a pre-requisite for success,” he said. “It actually makes the process quicker.”

More than 50 accounts participated in Sondrio’s covered bond. Italian accounts took 72.5%, Germany and Austria 15%, the UK 10%, and Switzerland 2.5%. Asset managers were allocated 60%, banks 24%, and others 6%.