PKO Bank Hipoteczny yesterday (Wednesday) issued the first benchmark Polish covered bond to be launched under an amended legal framework, after having attracted PLN1.2bn of orders for a PLN500m five year debut, and the issuer’s CEO anticipates a scaling up of the market going forward.

The deal is the first benchmark covered bond from PKO Bank Hipoteczny – the mortgage bank of PKO Bank Polski – following the launch of its programme in November and a PLN30m five year pilot issue in December. It is also the first benchmark covered bond from a Polish issuer since amendments to Poland’s covered bond legislation took effect on 1 January.

PKO began taking orders for the Aa3 rated new issue on 4 April, and completed the bookbuilding process on Wednesday of last week (20 April). The issuer then published the final terms of the deal last Friday, including the price, which was set at 65bp over three month Wibor. Investors were then asked to subscribe before the end of trading on Monday.

Five year Polish government bonds were yesterday seen at 30bp over six month Wibor, with six month Wibor 7bp higher than three month Wibor.

PKO issued the PLN500m (Eu116m) five year deal yesterday, allocating to 26 accounts. The issuer also announced that 37 investors had placed orders during the bookbuilding process, for a total amount of PLN1.24bn.

Rafał Kozłowski, CEO of PKO Bank Hipoteczny, noted that the deal is the first benchmark covered bond to be backed only by zloty-denominated residential mortgage loans, whereas all other mortgage-backed Polish covered bonds have been issued out of pools that include foreign exchange commercial loans.

“Thanks to the high quality of our cover pool and new law, covered bonds issued by PKO Bank Hipoteczny have the highest rating achievable for Polish financial debt instruments,” Kozłowski added. “Due to this fact, our covered bonds are an excellent supplement to portfolios of the Polish sovereign bonds.”

Mutual funds and asset managers were allocated 45% of the deal, pension funds 42%, banks 10%, and insurance companies 3%. Polish accounts took 96%, with international institutions taking 4%.

The European Bank for Reconstruction & Development (EBRD) announced on Wednesday of last week that it invested PLN21.5bn in the covered bond.

“EBRD has been supporting the Polish economy, in particular the Polish financial sector, by investing in stocks and debt securities (both unsecured and structured) of the Polish banks,” said Lucyna Stańczak-Wuczyńska, EBRD director for EU banks in the financial institutions group in London. “We are pleased that we can become an investor in the first transaction under the new covered bond legislation.

“We also hope that it will support further development of the Polish capital market.”

Kozłowski noted that the EBRD had played a “substantial role” in aligning the Polish covered bond legal framework with European best practices.

“We believe that regular issues combined with investors’ active approach will substantially increase the scale and liquidity of the Polish covered bond market.” he added.