Raiffeisenbank a.s. launched the first benchmark-style euro covered bond from the Czech Republic yesterday (Wednesday), a Eu500m five year deal half of which was retained, and an official at the bank said that the deal lays the groundwork for future issuance from it and other Czech banks.

The issuer held a roadshow that finished on 17 October and yesterday leads Barclays, BNP Paribas and RBI, the issuer’s parent, went out with initial price thoughts of the low 30s over mid-swaps area.

According to Jan Pudil, executive director of treasury, investment banking and financial institutions at Raiffeisenbank a.s, this reflected feedback from investors and the syndicate that it be positioned in the context of comparably-rated, at A2, Italian covered bonds, which are nevertheless CBPP3-eligble whereas Czech covered bonds are not. Credito Emiliano went out with IPTs of the 30bp area for a seven year OBG today (Thursday). Pudil said that Czech government paper was also a reference, although he noted that these are illiquid in euros.

The issuer is retaining Eu250m of the issue to use as collateral with the European Investment Bank (see previous coverage) and after the order book took demand including this amount to over Eu500m the spread was set at 32bp over mid-swaps.

“We were happy with the spread,” said Pudil. “It was certainly a very interesting exercise for us and we are pleased with the outcome.”

He said that the in allocations real money accounts were prioritised, whereas banks were cut back. Fund managers were allocated 52%, banks 34%, insurance companies and pension funds 13%, and others 1%. Germany and Austria took 62%, the UK 11%, Nordics 10%, CEE 8%, France 4%, and others 4%.

Pudil said that some 40 accounts participated and that this included investors who were not visited on the roadshow.

The issuer said that the deal will not be a one-off and Pudil said that it expects to return to euros in the next 12-18 months, subject to the development of the Czech economy and the bank’s lending – he noted that mortgage production is increasing at Raiffeisenbank and other Czech mortgage lenders.

The deal was launched ahead of a planned update to Czech covered bond legislation that Pudil expects to come through next summer, and which he said could lead to more Czech banks issuing in euros. UniCredit’s Czech unit is considered the most likely candidate, although four other banks also worked on the planned legislative update through the Czech Banking Association.

Pudil said that Raiffeisenbank’s roadshow and deal, and the investor work carried out in conjunction with this, should help future issues.

“Provided the legislative framework is in place, we could see a dormant market becoming much livelier next year,” he said.