UniCredit benefited from a lack of Italian supply to take over Eu1.8bn of demand for a Eu1bn 10 year OBG today (Wednesday), as a Eu500m 12 year Pfandbrief for Deutsche attracted Eu600m of orders, with the two banks offering similar premiums, and bankers said higher beta names will be favoured.

UniCredit’s new issue is only the fourth new benchmark obbligazioni bancarie garantite (OBG) of the year, with the last a Eu750m seven year for Banca Popolare di Milano on 1 June. Supply from the periphery overall has been limited, with the last peripheral benchmark a Eu1bn eight year cédulas for Sabadell on 2 June.

After announcing a mandate yesterday afternoon, UniCredit leads Crédit Agricole, Deutsche, JP Morgan, Natixis, Santander and UniCredit launched the 10 year conditional pass-through (CPT) OBG with guidance of the 25bp over mid-swaps area. The size was then set at Eu1bn and guidance revised to the 22bp area on the back of Eu1.5bn of orders, before the deal was re-offered at 20bp, with books over Eu1.8bn.

“It’s a very good result,” said a syndicate official at one of the leads. “They were able to achieve this result first of all because of the recent lack of overall supply in covered bonds, but also the lack of OBGs in particular.

“And of course UniCredit is a national champion, and has not been in this market for almost a year, so it is not surprising they got a good reception.”

Syndicate officials noted that UniCredit’s new issue had attracted greater demand than Deutsche Bank’s 12 year Pfandbrief, the only other benchmark covered bond in the market today, and said the Italian deal looked more attractive because of its double-digit positive spread and higher yield.

“I think this deal shows that higher beta issuers, as well as the non-Eurozone issuers that can offer a bit more spread, will do better in this market than the tighter-trading core names,” said one. “Investors are looking for anything with a bit more spread and a bit more yield.”

The deal was priced at 98.99 with a coupon of 0.375% to yield 0.477%.

Bankers said the deal offered a new issue premium of 3bp-4bp, seeing UniCredit April 2025s at 15bp, bid.

“That kind of premium, and the overall spread, is a pretty nice result for a peripheral issue and a market reopener,” said a syndicate official away from the leads.

Syndicate officials at the leads said the deal came around 70bp inside the 10 year BTP. Bankers noted that 10 year BTPs widened slightly this week, and suggested this partly reflected supply considerations, with Italy set to tap December 2026 BTPs next week.

Some bankers suggested that other Italian issuers could enter the covered bond market to get deals done ahead of a constitutional referendum in the country that is expected to be held in October or November and is seen as having the potential to cause uncertainty in the market.

“If you’re an Italian bank and you’re sitting on a deal that you want to do, it might make sense to go out sooner rather than later,” said a syndicate official. “UniCredit have certainly shown that there’s opportunities for the peripherals.”

However, another syndicate official disagreed.

“If you look at issuance so far this year, Italian banks have not been particularly active in the covered bond space, and that is partly because they just don’t have a huge asset pool to finance,” she said. “Their needs are limited, so I wouldn’t expect to see much more from them.”

Following a mandate announcement yesterday afternoon, Deutsche Bank leads Barclays, BMO, Deutsche, Nordea and UBS launched the Eu500m no-grow 10 year Pfandbrief with guidance of the 5bp through mid-swaps area, before fixing the spread at minus 7bp. The order book closed at Eu600m.

“It went pretty well, with the books in line with those of Commerzbank and WL Bank,” said a syndicate official at the leads. “There is a bit of oversubscription, not a huge amount, but that is not a bad result for a non-standard maturity and at these low yields.

“Of course, not everyone can buy out to 12 years, but without the bank treasury bid this is still a high quality order book.”

The deal was priced at 98.955% with a coupon of 0.25% to yield 0.339%.

Bankers noted that Deutsche’s deal was priced substantially back of the two benchmark Pfandbriefe launched earlier this week, with WL Bank’s deal having been priced at minus 17bp and Commerzbank’s at minus 16bp.

However, they said this was appropriate given that Deutsche’s outstanding Pfandbriefe are quoted wider than those of the other issuers, with Deutsche March 2024s seen at minus 16bp, mid, and June 2026s at minus 15bp.

“That suggests a new issue premium of around 4bp, which is in line with the premiums paid by WL Bank and SpaBol,” said a syndicate official at the leads.

Today’s issuance took year-to-date euro benchmark covered bond supply over the Eu100bn mark, to some Eu101.2bn, and bankers expect more deals to emerge this week.

“I think the pace of deals and mandates has surprised a few people this week, but the market has really got going,” said one. “I wouldn’t be surprised to see more tomorrow or on Friday, ahead of the UK bank holiday next week.”

Natixis Pfandbriefbank announced a mandate yesterday afternoon for a European roadshow ahead of a potential Eu250m mortgage Pfandbrief. DZ, Natixis and NordLB have the mandate.