Bankia attracted Eu2bn of orders for a Eu1bn cédulas today (Thursday) that bankers said reeled in premiums for peripherals after fellow Spaniard Popular a week ago opened the market at a wider level. More supply is expected, although possibly slowing ahead of an ECB meeting next week.

Bankia’s new issue came after Banco Popular Español last Thursday priced a Eu1.5bn seven year at 88bp – down from initial price thoughts of the 95bp area – which was seen as offering a final concession of around 20bp. The deal was first peripheral benchmark covered bond since 1 February.

Bankia leads Bankia, Barclays, BAML, Credit Suisse and Natixis today launched the seven year cédulas hipotecarias with guidance of the 90bp area, before revising guidance to the 85bp area and fixing the size at Eu1bn no-grow on the back of over Eu1.5bn of orders. The deal was then re-offered at 82bp, with the book closing at Eu2bn.

“They were able to move the spread in well and get good books at a premium that doesn’t seem over the top, looking at recent cédulas,” said a syndicate official away from the leads. “It’s a good result for them.”

Syndicate officials said the new issue offered a premium of around 14bp, seeing Bankia’s August 2022s at 68bp, bid.

They noted that this was a smaller premium than that paid by Popular and on previous cédulas that were launched while spreads were wider at the start of the year. They said this was appropriate given that Popular had printed a larger size and given that its deal was a market reopener.

“Popular looked a touch more generous than it maybe needed to be, whereas I think here they’ve got the right spread for everyone,” said one syndicate official. “There was a feeling that premiums could come in a bit for these kind of names and this is a good level in the end.”

Syndicate officials said the timing of the deal was significant given that ECB president Mario Draghi is next Thursday widely expected to announce additional quantitative easing and/or a cut to the ECB’s deposit rate at a meeting of the central bank. This, they said, would help increase investor appetite for riskier assets.

“While there is more risk appetite in the market right now than in recent weeks, there is an expectation that Draghi will next week do something that further increases appetite for credit and in particular peripheral credit,” he said.

“That Bankia have gone ahead now implies that maybe not all peripheral issuers are buying into that, and there is a degree of risk that Draghi disappoints and then it becomes more difficult to do this kind of deal. Bankia went for the bird in the hand, rather than the two in the bush.”

Bankia’s cédulas hipotecarias were upgraded from A- to A by Fitch on Friday, following an upgrade of the issuer.

Syndicate officials said issuers from both core and peripheral jurisdictions are continuing to monitor the market and added that supply is expected to continue at a brisk pace. However, they said issuance might dry up later next week in anticipation of Thursday’s ECB meeting.

“The market feels strong,” said one. “Perhaps Bank of Nova Scotia fell a bit short (see separate article) but otherwise the market is constructive, NIPs are going down, books are large, and issuance volumes are increasing.

“But I think we could see things could slow down a little as we get closer to next Thursday, as all eyes will turn to Draghi.”