AIB achieved a more than three times oversubscribed book and Bankinter an aggressive price on the first post-ECB, post-Greece covered bond benchmarks today (Tuesday), showing demand for peripheral credits to have remained strong after a brief hiatus in issuance.

The deals are the first Eurozone benchmarks since Portugal’s Caixa Geral de Depósitos sold a Eu1bn seven year covered bond a week ago, with the announcement of sovereign QE on Thursday and election of anti-austerity Syriza on Sunday having stymied issuance in the interim.

“All in all the new issue market remains pretty robust for covered bonds,” said a banker away from today’s deals, “and the peripherals are definitely taking advantage of the Draghi drug.”

A banker working on the Irish and Spanish deals said that the timing today made was well chosen.

“Post-Greece the markets have been very well behaved and you couldn’t have hoped for any better,” he said. “Greek assets were isolated and everything else finished higher yesterday (Monday).”

AIB Mortgage Bank came to market with a Eu750m seven year benchmark priced at 27bp over mid-swaps, after having pulled a 10 year deal in November.

Leads Barclays, BNP Paribas, HSBC, Commerzbank and UBS set initial price thoughts at the low 30s and then guidance at the 30bp area with books at Eu1.5bn. The books continued to grow with high quality orders, according to a syndicate official at one of the leads, before the re-offer was fixed at mid-swaps plus 27bp on the back of a 2.5bn order book comprising some 125 accounts.

AIB paid a new issue premium of 3bp-5bp, he added.

“Even with that relatively low NIP, they got a huge book and strong interest across all jurisdictions,” he said. “It’s a strong trade. It proves that Ireland is one of the preferred jurisdictions in Europe from an investor’s point of view.”

A syndicate official away from the leads said that a seven year was the right trade for AIB, noting that, with AIB having a 2021 bond trading at around 21bp bid, it appeared to be offering a relatively good premium.

“It was exactly the right approach, exactly the right strategy and exactly the right timing,” he said.

Another syndicate official away from the leads said the issuer could likely have tightened prices further if it were not for the bank’s failed attempt to launch the 10 year in November, adding that he saw fair value in the context of the low 20s.

“Overall it looked like a fair approach,” he said.

However, another lead syndicate banker said that the November experience had not had any impact on the pricing, noting that a new issue premium of 3bp-5bp was in line with what other peripherals, including Bank of Ireland Mortgage Bank, had paid recently. He said that extrapolating from AIB 2018s and 2021s implied fair value of 21bp-22bp over, but said that other peripheral curves, notably Spaniards’, implied the curve to be steeper and hence fair value being slightly wider.

“It is a great comeback for them,” he added. “They are a quality name and we always felt the November misfortune was just a year-end effect.”

Central banks and official institutions – a figure that would typically include CBPP3 demand – were allocated a relatively low 16%, asset managers 52%, banks 18%, insurance companies and pension funds 8%, and private banks 6%. Germany and Austria took 42%, Ireland 19%, the UK 8%, Switzerland 7%, France 7%, southern Europe 6%, the Nordics 5%, the Benelux 3%, Asia 1%, and others 2%.

Bankinter sold a Eu1bn 10 year cédulas hipotecarias at 38bp over mid-swaps, attracting Eu1.75bn of demand at the re-offer but almost Eu2bn before pricing was tightened. Leads Bankinter, Barclays, HSBC, JP Morgan and Santander had set IPTs at the mid-40s, which was revised to guidance of the 40bp area.

“That was fairly aggressive, more so than some others,” said a syndicate official at one of the leads, “but a quality book supported this approach and we received more orders so that we could fix it at 38bp over.”

The longest Bankinter cédulas outstanding were February 2018s, which the lead banker said were quoted at 19bp, bid. He pointed to a Sabadell seven year at 34bp and BBVA, Caixa and Santander 10 year paper at 30bp over as relevant comparables, noting that the latter had recovered well from previous underperformance.

He also said that the strong performance of Spanish sovereign paper had helped make Bankinter look attractive versus government bonds, noting that a new 10 year Bono auctioned ahead of the ECB’s QE announcement last week at 92bp over had tightened some 20bp, meaning that Bankinter was coming around 35bp through rather than the 60bp-75bp through at which it would have come two weeks ago.

He added that demand had been buoyed by Bankinter’s rarity as well as an upgrade of its cédulas to Aa2 and very good results last week.

A banker away from the leads said Bankinter had done well to tighten to 38bp, suggesting they also chose the right maturity.

“It all points to a nice 10 year trade working quite well,” he said.