Spain’s BBVA achieved a new issue premium towards recent lower beta supply on a Eu1.25bn seven year cédulas hipotecarias today (Tuesday) and attracted Eu2.5bn of demand, with bankers saying the outcome demonstrates increasing risk appetite, ahead of a key ECB meeting on Thursday.

BBVA’s deal follows a Eu1.5bn seven year cédulas for fellow Spanish issuer Banco Popular Español on 25 February and a Eu1bn seven year for Bankia last Thursday, which attracted Eu2.8bn and Eu2bn of demand, respectively. However, Popular’s deal – the first from a peripheral issuer since 1 February – was seen as paying a new issue premium of around 20bp and Bankia’s a 14bp premium, according to syndicate officials.

Banco Bilbao Vizcaya Argentaria leads BBVA, Crédit Agricole, Citi, Lloyds, and Société Générale launched the seven year cédulas hipotecarias with guidance of the 60bp over mid-swaps area, before revising guidance to the 55bp area plus or minus 3bp, will price within range, on the back of books over Eu2.3bn. The deal was then re-offered at 52bp and the size fixed at Eu1.25bn, with the book closing at Eu2.5bn.

“This deal has gone very well, and I think that is a function of increasing risk appetite,” said a syndicate official away from the leads. “Investors want the opportunity to perform strongly, so these products look appealing.”

Syndicate officials said the deal offered a new issue premium of around 7bp, seeing BBVA January 2022s at 40bp, mid.

“This is the same premium that we’ve seen other, lower beta names printing at in seven years for a materially higher volume,” said one syndicate official. “Bank of Nova Scotia paid a 7bp premium for a Eu750m seven year on Thursday and got Eu800m of demand, so BBVA getting Eu2.5bn with that kind of a concession is a very good result.

“It’s in line with the demand the other Spaniards have received, for quite a bit less of a pay up.”

Syndicate officials said the deal also came well inside the Spanish sovereign, seeing January 2023 Bonos at 84bp.

One noted that the Spanish government was also selling 30 year Bonos today.

“That the two of them can coexist is testament to a strong market, and it’s interesting that the two of them are both issuing today,” he said. “It’s a further example of peripheral issuers not wanting to wait and see what Draghi may or may not do to help them on Thursday and instead just taking the chips off the table.”

Syndicate officials said tomorrow is likely to be the final window for euro covered bond issuance this week, with market participants expected to focus on Thursday’s ECB meeting. However, they said the conditions for now remain supportive, citing encouraging demand for a Eu500m three year Pfandbrief for Berlin Hyp today that is the first covered bond to be priced with a negative yield (see separate article).

“We have had the two extremes today, a negative yielding Pfandbrief and an obviously much wider cédulas, but both have gone very well with well oversubscribed books,” said one syndicate official. “We can take a lot of comfort from that.”