BBVA built a Eu2.1bn book for a Eu1.25bn long five year covered bond today (Tuesday), giving it the most orders taken by a peripheral issuer since the summer break, and bankers said the deal shows that appetite for Spanish paper remains in place ahead of an upcoming general election.

The Banco Bilbao Vizcaya Argentaria (BBVA) new issue comes after a series of Spanish benchmarks, with CaixaBank last week having built a Eu1.88bn book for a Eu1bn five year issue that syndicate officials described as the most impressive peripheral deal in recent months, while Bankinter, Caja Rurales Unidas and Banco Sabadell also tapped the market in October.

Leads BBVA, Commerzbank, Crédit Agricole, HSBC and Natixis announced the Eu1.25bn May 2021 cédulas hipotecarias without initial price thoughts, opening the books with guidance of the low 40s over mid-swaps area. Guidance was then revised to the 40bp area, plus or minus 2bp, before the deal was re-offered at 38bp. The order book closed at Eu2.1bn, pre-reconciliation.

“It looks fantastic,” said a syndicate official away from the leads. “A Eu2.1bn book is at the higher end of what we’ve seen for a while and is obviously very impressive, and they were able to bring in the spread, too.”

Syndicate officials said the deal looked attractive as it offered a pick-up of around the high teens versus secondary levels, estimating that fair value for the new issue was in the context of 20bp-25bp, based on the issuer’s secondary curve.

“This is one of the top, top Spanish names and it is coming quite wide of the secondaries, so it is no surprise it has gone well,” said one.

The syndicate officials noted that other peripheral deals, such as CaixaBank’s recent issue, had also paid premiums of 15bp-20bp.

“In isolation the premium does look steep,” said another syndicate official, “but I think it’s just further evidence of pragmatism from issuers, and possibly also that there is not much correlation between secondary levels and where new issues are landing at the moment.”

The syndicate official added that he felt the difference in pricing between BBVA’s new issue and CaixaBank’s was appropriate, given the difference in credits.

“A 5bp differential looks about right, and I think that is probably the main analysis that investors did also,” he added.

Syndicate officials said the deal came around 10bp-15bp inside the Spanish sovereign.

The deal is BBVA’s second benchmark covered bond of the year, following a Eu1.25bn seven year issue in January.

Bankers said Spanish issuers have been keen to come to the market ahead of a Spanish general election on 20 December. Noting that demand for Spanish paper did not seem to be diminishing in spite of the recent supply, they said conditions are encouraging for further issuance.

“This outcome shows there is good liquidity for Spanish issues even though there’s been a fair bit of supply recently,” said one. “Investors are clearly still happy to play, even in spite of the upcoming elections.”

Deutsche Bank’s Spanish unit, Deutsche Bank SAE, is on the road ahead of an expected inaugural public cédulas hipotecarias issue, with investor meetings scheduled until Thursday.

Syndicate officials said they expect possibly one or two more euro benchmarks this week, with a public holiday in France tomorrow (Wednesday) stymieing activity. BBVA’s success came after demand for a Eu750m seven year National Australia Bank (NAB) covered bond yesterday (Monday) was deemed disappointing, in what was the only euro benchmark of the day.

The only other benchmark activity today was a Hypo Vorarlberg tap (see separate article).