UniCredit issued its first conditional pass-through benchmark covered bond today (Thursday), a Eu1bn 10 year deal that attracted Eu2bn of demand at a level said to have incorporated no premium for the structure, and which is expected to pave the way for wider take-up of CPTs.

The Italian bank is only the second issuer of a conditional pass-through benchmark, after NIBC of the Netherlands pioneered such issuance in October 2013, and UniCredit is the first national champion to take up the structure for public issuance. The deal was also, according to a syndicate official at one of the leads, the tightest ever priced obbligazioni bancarie garantites issue.

“This is a very impressive achievement,” said the lead syndicate official. “This deal shows that investors on the whole are fine with the CPT structure.”

“It has changed the market paradigm for the structure,” he added. “In Italy it will pave the way for more CPT OBGs, and we know that other issuers in other jurisdictions are also looking.”

Leads Banca IMI, Credit Suisse, Natixis, RBS, Société Générale and UniCredit launched UniCredit’s 10 year deal with initial price thoughts of the mid-swaps plus mid-20s area, before tightening to guidance of the 20bp area. The re-offer was set at 18bp on the back of a Eu2bn book, with some 100 accounts.

A syndicate official at one of the leads said that a UniCredit January 2024 issue, a Eu1bn 10 year soft bullet, was trading at mid-swaps plus 17bp, mid. He suggested that if UniCredit had instead issued a soft bullet under its old programme today it would have come at the same level and attracted the same quantity of orders.

“The structure had no impact on the price or level of demand,” he said. “Perhaps a soft bullet would have got Eu500m of orders more, but it did not make much difference. True, some accounts did not want a CPT, but only a limited number.”

That the issuer is a tier one Italian name also had a significant impact on the deal and the pricing rationale, according to the lead syndicate official.

Another agreed, saying that the deal – which was preceded by a European roadshow earlier this week – offered no premium for its structure. He saw UniCredit’s January 2024 trading at 14bp, mid, and suggested a limited new issue premium had been offered to reflect the new issue’s later maturity.

Bankers away from the deal also said the CPT structure had little effect on the final levels, with one, seeing UniCredit’s January 2024 trading at 14bp, bid, suggesting the deal offered a new issue premium of 2bp-3bp.

“There is a minimal pricing difference, due to the compressed state of the market,” he said. “Clearly the CPT structure is not a block to deals and investors are not too worried.”

Another syndicate official suggested that the price reflects both some investors having accepted the structure and the state of the market.

“I expect that the CPT story will go the same way as the soft bullet story,” he added. “Some investors will say they’re not comfortable with the structure but eventually even the most traditional investors will learn to live with it.”

Another banker said that the deal had been artificially supported by the state of the market, especially by low rates and CBPP3 buying.

“The real test for CPTs will come when the market is not so well supported,” he said, “but I don’t think that time will arrive for two or three years.”