Hypo Oberösterreich sold its first public covered bond today (Thursday), a Eu300m seven year that attracted over Eu800m of orders in just one hour in a pre-ECB window, thanks partly to an attractive pick-up versus its peers, and the deal was hailed as the latest in a string of good results for Austria.

The new issue comes after a turning of the tide for Austrian credits, with bankers citing improving sentiment towards the formerly troubled jurisdiction after Raiffeisenlandesbank Oberösterreich – a part owner of Hypo Oberösterreich – attracted over Eu2bn of orders to a Eu500m 10 year debut on 20 September, and after the successful conclusion of a Heta debt buyback earlier this month.

“This new issue is only a sub-benchmark, but if you look at it in the wider context of the jurisdiction, we have had some very good experiences with Austrian issuers recently,” said a banker. “With Hypo Oberösterreich and RLB Oberösterreich before them, we have new issuers coming to the market with very successful deals, and if you look at the outstanding benchmarks, all are trading well at quite tight levels.”

Hypo Oberösterreich’s first public covered bond issue follows a European roadshow that concluded on Tuesday and the publication of a mandate for a Eu300m no-grow seven year mortgage Pfandbrief yesterday (Wednesday) afternoon.

Leads DZ, Erste, LBBW and RBI launched the deal at 9:00 CET this morning with guidance of the 10bp over mid-swaps area, before fixing the spread at 8bp at 9:40, with the book closing at 10:00. The size of the order book was not disclosed through the execution process, but the final book included over Eu800m of orders from over 60 accounts.

“The deal was quickly and comfortably subscribed and the book is very good, with almost as many orders as in some of the recent larger trades,” said a syndicate banker at one of the leads. “It was a very speedy process, which was possible because they prepared the ground very well with an extensive roadshow.

“We felt quite confident we could build a decent book before the ECB because many people were interested and we received very good feedback yesterday evening.”

Syndicate bankers said that fair value for a new benchmark Austrian covered bond would be around flat to mid-swaps, seeing September 2026s from RLB Oberösterreich at around 1bp, mid. They said that the pick-up of around 8bp for Hypo Oberösterreich’s deal included a premium to compensate for its sub-benchmark size and the issuer’s lower covered bond rating (AA+ from Standard & Poor’s) than that of RLB Oberösterreich (Aaa from Moody’s).

The leads also cited as comparables a variety of benchmarks from other Austrian issuers, including Raiffeisenlandesbank Niederösterreich-Wien April 2021s at minus 3bp, mid, September 2022s at minus 0.5bp, and March 2025s at 1bp.

The lead syndicate banker said that the deal could have been priced tighter.

“But as this was their first, the issuer wanted to keep investors happy and not tighten further than plus 8bp,” he added. “This has prepared them well for future issuance.”

The new issue was seen as offering a pick-up of around 43bp versus the Austrian sovereign.

The public debut was launched from a newly established covered bond programme, with Hypo Oberösterreich having previously issued privately placed covered bonds out of a different programme.