Bawag PSK printed a Eu500m six year covered bond today (Tuesday), and syndicate officials said a quality, granular book for the deal of over Eu900m suggests investors are becoming more comfortable with buying Austrian paper.

The last Austrian benchmark covered bond, a Eu500m issue for Hypo Tirol on 4 February that drew orders of over Eu550m, was deemed to have found more modest demand because of renewed headlines regarding potential losses for Heta bondholders.

Bawag leads Citi, Erste, JP Morgan, LBBW and UniCredit launched Bawag PSK’s Eu500m no-grow six year issue with guidance of the 30bp area, before revising guidance to the 28bp area. The spread was then fixed at 27bp, with the book closing at over Eu900m.

“At first glance, the size of the book might not look amazing for a covered bond at the moment,” said a syndicate official away from the leads, “but for Bawag – for an Austrian issuer – this is a pretty good result.”

A syndicate official at one of Bawag’s leads said investors are still concerned by negative headlines around the Austrian market.

“For sure this is still a topic for every Austrian issuer that tries to come to the market, but for these first and second row names, you just have to be precise,” said the lead syndicate official. “Bawag is a different animal from Hypo Tirol or the others – it has no exposure to Heta or to Central and Eastern Europe, which was a big advantage in marketing this deal.

“If an investor is going to buy into any Austrian deal, this is the kind of issuer they want to see, or else they need a much larger premium.”

The lead syndicate official said the quality and granularity of the order book was a highlight of the deal, with over 80 accounts involved, and particularly strong bids from the Nordics and central banks outside the ECB covered bond purchase programme.

“Trade to trade, it feels to me like investors are becoming more comfortable with buying Austrian paper,” he added.

Syndicate officials said the deal offered a new issue premium of around 6bp, seeing Bawag 2022s at 18bp, mid, and Bawag 2023s at 19bp.

“That premium is substantially less than those paid by other Austrians recently and is a great success for Bawag,” the lead syndicate official added.

Hypo Tirol’s recent issue was seen as being priced with a premium of around 15bp, while a Eu750m seven year issue from Erste on 12 January was deemed as offering around 12bp at its re-offer of 16bp over mid-swaps.