RLB NOe-Wein priced a Eu500m 10 year covered bond today (Monday) that bankers deemed successful in light of recent concerns around Austrian credits, even if the order book and movement from IPTs to re-offer were modest. Banco Popolare and DKD are set to issue tomorrow.

Leads Crédit Agricole, LBBW, NordLB and RBI launched the Raiffeisenlandesbank Niederösterreich-Wien (RLB NOe-Wien) 10 year Eu500m no-grow trade with initial price thoughts of the mid-swaps plus low single-digits area before setting guidance at plus 1bp. The 1bp level was retained as the re-offer, and the deal was printed with a Eu700m order book comprising 50 accounts.

Some bankers away from the deal suggested the lack of movement between guidance and re-offer was a result of a pushback from investors.

“They took an aggressive approach and perhaps didn’t quite reach their targets, so it looks like there was some price resistance,” said one.

Another syndicate official agreed, but added that the deal should still be considered a success.

“It looks like some investors dug their heels in and said they were not buying this at flat,” he said. “But with books at Eu700m, it’s still got healthily covered, and it looks like a great print.”

A lead syndicate official – noting that the trade is one of the tightest ever Austrian covered bonds and the tightest 10 year benchmark from any jurisdiction this year – played down any resistance from investors and said the price was not tightened further in order to find a level that accommodated real money accounts.

“There was no significant price sensitivity in the book,” he said. “The issuer was talking to accounts who had expected the deal to come at plus 1bp. We wanted to protect the real money and smaller accounts that had shown early interest and not push them out, so we kept it at plus 1bp.”

He acknowledged that the trade was not as oversubscribed as some recent deals, but said that given troubles experienced by the RZB group – of which the issue is a member as well as RBI – and “other bad headlines” it was a good result.

He added that while domestic participation was higher than that seen in last week’s Bank Austria deal, the Eurosystem had cut its order by 60%, also in order to accommodate real money investors.

“This is something we have not seen before,” he said.

A banker away from the deal suggested demand had also been negatively affected by the quantity of supply of Eu500m 10 year deals from Austria, following Bank Austria’s and Erste’s trades.

“If I was speaking to an Austrian issuer now I certainly wouldn’t be recommending a 10 year maturity for their next trade,” he said.

However, another syndicate official away from the leads said investors were not yet tired of 10 year issues.

“The whole curve is open for issuers,” he said. “Austrians don’t have too much outstanding in the long end of the curve compared to other jurisdictions.”

A syndicate official at one of the leads cited as a comparable a UniCredit Bank Austria Eu500m 10 year deal that came at 3bp on Wednesday and was this morning trading at flat, mid, while a syndicate official away from the leads cited an Erste Group Bank 10 year priced at 6bp on 20 January that was also trading at flat.

Banco Popolare this morning announced a mandate for a seven year covered bond, with Banca Aletti, Commerzbank, LBBW, Natixis and Mediobanca as leads.

A syndicate official at one of the leads said they were gathering feedback this afternoon and, after a four year absence from the market by the issuer, were hoping to “wake up investors and get lines ready”. He added that the leads had received strong feedback and expected to launch the deal tomorrow (Tuesday), subject to market conditions.

The lead syndicate official put fair value for the deal at around mid-swaps plus 25bp-27bp, based on a Eu750m January 2022 BPER issue that was re-offered at 42bp over on 13 January and is now trading at 21bp, mid, and a Eu1bn January 2022 Intesa Sanpaolo, priced at 25bp on 14 January and now trading at plus 7bp. With a new issue premium, the deal should come at around mid-swaps plus the high 20s to low 30s, he added.

A syndicate official away from the leads said he expects the deal to go well.

“The market is all about the peripherals, and it should offer a good pick-up versus Italian top tier names,” he added.

Dexia Kommunalbank Deutschland (DKD) is also expected to come to market tomorrow, with a Eu500m no-grow seven year trade that was initially announced on Friday.

Due to the covered bonds only having an A+ rating from S&P, the deal will be LCR-eligible at Level 2A rather than, as for higher rated Pfandbriefe, Level 1, but a syndicate official away from the leads said this is unlikely to negatively affect demand.

“At the minute investors will take whatever they can get their hands on,” he said. “And they will be compensated in the spread.”

The effect has already been priced into DKD’s paper on the secondary market, he said, noting a June 2019 deal from the issuer, priced at 27bp over mid-swaps in June 2014, is now trading at minus 14bp, mid.

He added that another deal was also in the pipeline, with a mandate possibly to be announced tomorrow.

“There are a few things kicking about and the market is in good shape,” he said.