RLB NOe-Wien on Monday sold one of the tightest Austrian covered bonds, a Eu500m 10 year deal, and an official at the issuer told The CBR that the outcome was satisfactory even if investors’ concerns over negative headlines had prevented an even better result.

Tim Geissler, head of treasury at Raiffeisenlandesbank Niederösterreich-Wien, said that all in all he was satisfied with the transaction. He nevertheless said that the issuer had been hoping to achieve a slightly tighter spread of flat to mid-swaps.

“I know from a trader’s perspective it’s really expensive,” he added. “I understand that a lot of investors just said ‘this is too expensive for me’, so we are OK with the Eu700m of orders.”

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

Banks took 72% of the deal, central banks 15%, funds 8%, and official institutions 5%. Investors from Germany were allocated 48%, Austria 40%, France 6%, Italy 3%, the Benelux 2% and the UK 1%.

Geissler acknowledged that some of the price resistance was the result of concerns some investors may have over the group’s exposure to Russia-related risks.

“We do have problems in eastern Europe,” said Geissler. “There are a lot of political developments that aren’t easy for us all to understand – nobody really knows what’s going on in Mr Putin’s head.”

However, he emphasised the distinction between Raiffesen Bank International (RBI) and its parent, RZB, of which the issuer is the largest shareholder.

“Raiffesen Bank International, our granddaughter, is one thing, and Raiffesen Group Austria itself is another,” he said. “It is still a very sound group, with 57,000 people working in that group in Austria, with 4 million customers and 2 million members.

“At the moment, from my point of view, when you talk to investors in Germany or France, they say ‘this is all Raiffesen’,” he added. “But this is not true. We will show a high a high solidarity with our granddaughter in Europe, we will help them whenever it is possible, but we are not in Russia. We are not in Ukraine. And investors have to understand that.”

Geissler also argued that the issuer’s collateral is of a high enough quality to achieve tighter levels, saying that its cover pool is one of the best in Europe.

“When we established it four years our goal ago was to have only mortgages from our core region, one of the best performing regions in Europe – Vienna and lower Austria – and nothing else: no Czech Republic, no Slovakia, no other parts of Austria. We have high granularity, with more than 13,000 single mortgages in that cover pool, and these are all old, well established mortgages. We know our customers very well.

“If you only look at the cover pool and the AAA rating, it is OK to price a covered bond at zero, or at minus 1bp, but we know that the name Raiffeisen at the moment doesn’t perform so well.”

Geissler said that the issuer approached the market due to supportive conditions but also to make good on a promise to investors.

“When we started our benchmark programme in 2012 we promised our investors that we would come out with a benchmark every year,” he said. “We cancelled our transactions last year because of a high liquidity surplus in the group and investors asked us when we would come out with our next benchmark, so we said ‘trust us, we will come out in the first quarter of 2015’ – especially because of the high OC in our cover pool, which has in the meantime grown to Eu2.3bn. And it was a nice opportunity to get cheap funding.

“Everybody thought this was a good window now.”

Geissler said that due to the headlines surrounding the group the issuer would not be launching any senior deals and will furthermore not be carrying out any further wholesale funding this year.