An ING Belgium Eu1bn six year issue benefited from scarcity value and an attractive level following a widening of spreads to attract Eu1.4bn of orders today (Thursday) amid challenging conditions, bankers said, while a UniCredit Eu500m five year was seen to have found the going tougher.

Following a European investor roadshow that ended yesterday (Wednesday), ING Belgium this morning came to the market with its second benchmark covered bond – its debut was a Eu1bn six year issue in December 2013.

Leads Danske, ING, LBBW, Natixis, NordLB and Société Générale went out with initial price thoughts of the 10bp over mid-swaps area for the six year mortgage Pandbrieven, gathering IOIs of Eu1bn within an hour, then moved to guidance of the 8bp area with orders having reached Eu1.3bn.

The re-offer was fixed at 7bp on the back of Eu1.5bn of demand, with the final order books after reconciliation at around Eu1.4bn with more than 70 accounts.

A syndicate official at one of the leads said the outcome was one of the strongest seen this week, after many recent deals were marginally oversubscribed and struggled to find momentum.

“This is one of the scarcest issuers out there, the deal was well marketed, they are a core, quality name that is supported with the ECB and they are coming out with a positive spread,” he said. “All of these benefits mean it is not really surprising this is one of the more successful deals of the week.”

Syndicate officials away from the leads agreed, highlighting in particular as a reason for the deal’s success that it was CBPP3-eligible while offering a spread in line with some non-Eurozone issuers – noting that a Eu1.25m five year Swedbank issue was printed at 7bp on Tuesday.

“It has the best of both worlds,” said one.

The issue comes on the back of a widening of covered bond spreads this week, with core Eurozone secondaries said by one banker to have moved out some 5bp yesterday and also underperformed non-CBPP3-eligible paper. Another banker noted that Belfius 2021 paper had widened 2bp-3bp since the start of the week.

Another syndicate official praised the leads for having been able to tighten the price by 3bp through the execution, after some issues this week were priced in the middle of guidance.

“This testifies that there is still a strong bid for core names that offer a positive spread, and underlines that the challenges peripheral names have faced in printing six year deals don’t apply to core names,” he said. “It is a very successful print.”

Syndicate officials at and away from the leads estimated fair value for the new issue to be around 2bp over mid-swaps, noting KBC April 2021 paper was quoted at 3bp, bid. They noted the new issue premium of around 5bp was one of the slimmer concessions offered by recent deals.

The lead syndicate official added that the new issue also offered a pick-up of around 30bp versus OLOs, and 47bp versus Bunds.

UniCredit Bank AG leads BayernLB, DZ, Helaba, Natixis and UniCredit priced the Eu500m no-grow five year mortgage Pfandbrief at 9bp through mid-swaps, having launched it with IPTs of the minus 9bp area and maintained that level for guidance. Orders reached Eu550m at the last update when the spread was set, with the final order book size not available by the time The CBR went to press.

Syndicate officials away from the leads said the spread looked generous compared with secondary levels and recent trades – noting the last five year Eu500m Pfandbrief, a MünchenerHyp issue on 29 July, came at 17bp through mid-swaps – but said this is to be expected with market conditions currently much more challenging.

Seeing UniCredit’s 2020-2023 paper all quoted at minus 19bp-15bp, bid, the syndicate officials estimated fair value for the new issue to be around minus 17bp, but noted secondary levels were squeezed.

“Their approach to pricing seemed sensible, but it’s a sign of the market sentiment that they got stuck at minus 9bp,” said one. “That is slightly surprising, however, as Pfandbriefe have been the one part of the market that, in both primary and secondary, have been extremely resilient.”

Another syndicate official away from the leads agreed that the leads’ approach had been appropriate.

“It looks as though they found it tough, but at least they got the deal done and took the size they wanted,” he added. “It just shows that the spread of even the best names are 7bp-8bp wider than they were earlier in the year.”

The deal is UniCredit’s third benchmark covered bond of the year, following six and eight year Eu500m issues in March and July, respectively.