Banco Popular Español attracted over Eu2.8bn of orders for a Eu1.5bn seven year cédulas today (Thursday), reopening the peripheral market after almost four weeks without a benchmark, and while bankers said the deal offered a generous premium, they deemed this a sensible approach.

The Spanish bank’s new issue is the first benchmark covered bond from the periphery since a Eu1.5bn seven year issue for CaixaBank on 1 February.

Leads Banco Popular, HSBC, Natixis, SG and UBS launched today’s six year cédulas hipotecarias with initial price thoughts of the 95bp over mid-swaps area. The deal was then re-offered at 88bp, on the back of over Eu2.5bn of orders, before the size was fixed at Eu1.5bn, with the book closing at over Eu2.8bn.

Some syndicate officials away from the leads said the deal offered a new issue premium of around 20bp based on the mid side of Banco Popular’s curve, seeing interpolated fair value for the deal at around 68bp.

They noted that this premium was comparable to premiums of 15bp-25bp paid by Spanish cédulas earlier in the year, and suggested the pricing approach was sensible given the hiatus in peripheral issuance.

“It looks fairly cheap,” said one, “but given the lack of peripheral covereds we’ve seen this year and especially in recent weeks, it’s a fairly untested market, so it makes sense to start generously and try and guide it in from there.”

Another syndicate official suggested, however, that the deal could have been done successfully at a tighter spread.

“I have not seen any indication in this market, with all of the five deals done earlier this week having gone well, that you need such a premium to sell a cédulas,” he said. “It will be interesting to see what the second and third cédulas in the market now look like.”

“Will they have to also pay up now, or should they wait for this deal to tighten by 5bp or so? It is hard to say.”

Banco Popular was among names caught up in the recent turbulence in the Additional Tier 1 (AT1) market and syndicate officials said that this could have also had an impact on the pricing of the deal.