Bank of Ireland launched the first peripheral benchmark covered bond in over a month today (Wednesday), a seven year deal at 5bp over mid-swaps, with bankers away from the leads citing the lack of supply as a factor in what they considered to be relatively slow execution.

Leads BNP Paribas, Citi, Credit Suisse, Davy and UniCredit launched the euro benchmark seven year deal with initial price thoughts of the 7bp over mid-swaps area, before setting guidance at 6bp having gathered Eu1bn of orders. The re-offer spread was then set at 5bp but the size had not yet been set as The CBR went to press.

While recognising the level as a good result, bankers away from the deal noted that the execution had been relatively slow compared with some recent deals, but said this was not surprising given the market backdrop.

“It is to be expected, I think,” said one syndicate official. “The market has been a bit quieter and we’ve seen a bit of weakness in the last few days.”

Another syndicate official said the slower execution could also be explained by lack of recent supply from Ireland and other peripheral jurisdictions.

The most recent deal from an Irish issuer was an AIB Mortgage Bank Eu750m seven year, sold on 27 January, while the most recent from the periphery was a Banco Popular Español Eu1bn 10 year on 24 March.

“There hasn’t been an Irish issuer come to market since January,” the syndicate official said. “You could argue that works in their favour, leading to a scarcity of Irish paper, but it also means it could have taken them a little while to work out the shape of the curve.”

The syndicate official also noted that AIB’s February 2022s printed at 27bp over mid-swaps and are now at around 2.5bp, mid.

“So there’s probably been quite a bit of price discovery to do, to be fair to the leads.”

Citing AIB’s outstanding issue, bankers away from the deal saw fair value for the new issue at around 1bp-2bp. One expressed surprise that the level had not been tightened further, while noting that a 6bp new issue premium was not that unusual as a starting point.

“You often see that kind of premium in the IPTs stage before leads typically tighten by around 4bp, but they don’t appear to be doing that here,” he said. “If the issuer’s ambitions were to print Eu1bn, then that makes sense. Maybe they don’t have the traction to both print Eu1bn and tighten by the usual 4bp.”

Another syndicate official away from the deal noted that a new issue premium of 3bp would be one of the tighter premiums achieved by a peripheral issuer.

“It’s a good outcome for them,” he said.

The deal came roughly flat to where a seven year Irish government bond would be priced, the syndicate official added, seeing Ireland March 2022s at 3.5bp, mid.