Banca MPS and UBI Banca issued their first covered bonds of the year today (Tuesday), with MPS’s being its first benchmark from a programme recently converted to CPT format, and although some saw demand for UBI’s as underwhelming, bankers said appetite for peripheral paper is encouraging.

The Italian issues followed a Eu500m five year from Banca Carige that was yesterday (Monday) priced at 100bp over mid-swaps, and bankers said it is a positive sign that peripheral deals have been comfortably oversubscribed, as a Eu750m seven year from Banco Santander Totta also reopened the Portuguese market yesterday.

Maureen Schuller, head of covered bond strategy at ING, noted that 35% of this month’s supply has come from peripheral issuers in Ireland, Italy, Portugal and Spain.

“Peripheral Eurozone issuers remain well present in the primary market,” she said, but added: “The peripheral transactions continue to come to the market at an extra premium compared to core Eurozone deals.”

Banca Monte dei Paschi di Siena (Banca MPS) leads Banca MPS, JP Morgan, RBS and UniCredit are pricing the Eu750m long six year deal at 85bp over mid-swaps, having issued initial price thoughts and guidance of the 85bp area. The books closed at Eu800m.

The deal is the first to be issued by Banca MPS with a conditional pass-through (CPT) structure. The Italian issuer gained bondholders’ consent to convert its programme to a CPT format in June in a move that earned the bonds upgrades from Fitch and Moody’s. The programme is now rated BBB by Fitch and A2 by Moody’s, while DBRS assigned an A (high) rating.

“Obviously this is a pretty big landmark for Banca MPS, and it’s very pleasing to see that it went well,” said a syndicate official at one of the leads.

Syndicate officials said the deal would likely have priced with a spread nearer to that of Banca Carige if the issuance was not from a CPT programme, with the ratings benefit that brings. Carige’s issue yesterday is rated Ba1/BBB-.

The lead syndicate official noted that the Banca MPS April 2021s were quoted at around 54bp, bid.

“Eu800m of demand is a good response,” added a syndicate official away from the leads. “They can be pleased with that.”

Unione di Banche Italiane (UBI Banca) leads Barclays, Commerzbank, Crédit Agricole, Credit Suisse, Natixis and RBI priced the long six year at 36bp over mid-swaps on the back around Eu700m of orders, after having launched the deal with guidance of the 35bp-37bp area. The books closed approaching Eu800m.

“In the end this has gone in line with how recent deals have been doing,” said a syndicate official at one of the leads. “It’s comfortably oversubscribed and an encouraging result.”

Syndicate officials away from the leads, however, said demand for the deal was more modest than they had expected.

“I am slightly surprised by this deal,” said one. “They are a solid name, a relatively rare issuer, and the price seems right, so I had expected them to get more demand.

“It’s not too worrying as it is a busy day and there’s a lot of other supply out there, as well as Banca MPS, but I had thought they’d build better books than that.”

The lead syndicate official said the deal offered a new issue premium of around 15bp based on its secondary curve, which he said was less than the 20bp pick-ups paid by some peripheral trades, such as Spain’s Cajamar and Banco Santander Totta. He said this is appropriate as UBI Banca’s covered bonds are rated Aa2 and AA (low) by Moody’s and DBRS, whereas Cajamar’s issuance is rated BBB+ and A (high) and because Portugal is a “more problematic” jurisdiction.

UBI Banca’s last euro benchmark was a Eu1bn February 2025 issue in November 2014.

Banca Carige said its deal yesterday marked the issuer’s return to the institutional bond market after a two year hiatus, and is meant to strengthen the bank’s liquidity position and diversify its funding sources.

“The transaction has been characterised by a good participation of asset managers, banks and other institutional investors – including the Eurosystem – both from within and outside Italy,” it said.