UniCredit Bank Czech Republic & Slovakia today (Thursday) sold a Eu250m five year sub-benchmark covered bond, attracting Eu340m of orders for the issuer’s first publicly-placed euro-denominated deal, with the euro covered bond market otherwise quiet ahead of a key Greece meeting.

UniCredit Bank Czech Republic & Slovakia sold its first international covered bond in December 2013, a Eu800m five year issue from an EMTN programme under Czech legislation. The new issue, which was first announced in November, is the issuer’s first publicly placed euro-denominated deal and the first covered bond backed by both Czech and Slovakian mortgages to be publicly placed.

Leads UniCredit and RBI launched the Eu250m five year deal, rated A3 by Moody’s, with initial price thoughts of the high 40s over mid-swaps area, moving to guidance of 45bp-47bp. The re-offer was fixed at 45bp, before the leads built a final book of Eu340m.

“It seems to have gone well,” said a market participant. “They improved from the price thoughts and the deal is well oversubscribed. They must be pleased.”

The first benchmark-style covered bond from the Czech Republic was a Eu500m five year deal sold by Raiffeisenbank a.s. in October 2014, half of which was retained.

The lead syndicate official said Raiffeisenbank’s November 2019 was the only comparable for the deal, and saw it at 48bp, bid, but added that the deal was illiquid and “in sticky hands”, making fair value difficult to calculate.

The market participant saw Raiffeisenbank’s issue at 41bp, mid, noting that the covered bonds had been downgraded from A2 to A3 since the deal was sold at 32bp over.

Fund managers took 51.8% of the deal, banks 33.8%, insurance companies 8.6%, corporates 4%, others 1.8%. Accounts from Central and Eastern Europe 44.8%, Germany 26.6%, Austria 15.8%, UK & Ireland 7.4%, the Benelux 2.6%, Italy 2%, Switzerland 0.8%.

“It is a good result for UniCredit Bank Czech Republic & Slovakia, but it is particularly good to see a new market emerging,” added a syndicate official away from the leads.

The market participant said he believes other Czech issuers will wait for an expected improvement to the Czech Republic’s legislative framework, which is due to go before parliament in summer.

“There will then be a cooling off period so I think we will not see other issuers, those currently without covered bond programmes, come until next year,” he said, noting the improvement is expected to bring rating uplifts for issuers.

“I think investors would have been happy for this deal to be a benchmark,” he added, “but for Czech issuers liquidity is plentiful, so you have to ask whether selling Eu500m rather than Eu250m makes sense for them.”

The lead syndicate official agreed.

“This size is just what they need,” he said. “The pool is not that big, and it’s already covering other deals.”

Meanwhile, bankers said they expected no further primary market activity this week while issuers await the outcome of a Eurogroup meeting on Friday, where discussions will be held on a proposed list of reforms from Greece.

“All eyes are on the Eurogroup meeting now,” said a syndicate official. “But there are a few issuers thinking about issuance, so if the market opens on a stable note next week, and it looks like it will, we will surely see more deals done.”