OP Mortgage Bank attracted orders of over Eu2bn to a Eu1bn seven year covered bond today (Thursday), pricing it at 4bp through mid-swaps with a premium of some 4bp, having benefitted from a build-up of investor demand after a fallow new issuance period.

OP’s new issue is only the second benchmark covered bond in a week, following a Eu500m long nine year Pfandbrief for DG Hyp yesterday, with the market having been subdued in part by German holidays over the weekend.

OP Mortgage Bank leads BNP Paribas, DZ Bank, LBBW and OP launched the seven year issue with guidance of the flat to mid-swaps area this morning. Guidance was then revised to the minus 2bp area and the size set at Eu1bn on the back of books above Eu1.8bn. The spread was later fixed at minus 4bp with books “well above” Eu2bn.

“It’s a really good result for them,” said a banker away from the leads. “Eu2bn plus is impressive demand – even taking the ECB ticket into account – and it shows how much appetite there is out there after the quieter weeks we’ve had of late.”

The deal is understood to be OP’s tightest ever benchmark covered bond, although fellow Finnish issuers Nordea and Aktia have printed benchmarks at the same or tighter levels.

Bankers said the deal offered a new issue premium of around 4bp, seeing OP September 2022s at minus 9bp, mid, May 2023s at minus 8bp, and November 2024s – which they noted is an older high coupon bond – at minus 9bp. They also cited Nordea Mortgage Bank November 2023s at minus 8bp and Nordea Bank Finland November 2024s at minus 9bp.

The new issue also offered a pick-up of some 25bp versus Finnish government bonds.

“Even at these outright tight levels, which are close to the tightest we’ve seen in Finnish covereds, there is a decent pick up over govvies,” said a banker away from the leads.

The new issue is OP Mortgage Bank’s first benchmark covered bond since May 2016, when it sold a Eu1.25bn seven year, and the second from Finland this year, following a Eu1.5bn five year for Nordea Mortgage Bank on 16 January.

Photo: OP-Pohjola offices, Helsinki; Credit: Arto Alanenpää/Wikimedia Commons