Banco Commercial Português attracted over Eu1.8bn of orders to a Eu1bn five year OH today (Tuesday), its first benchmark covered bond in eight years, finding sufficient demand to tighten 10bp and price close to peer CGD, albeit at arguably the widest spread for a benchmark in over a year.

The new issue comes shortly after Banco Santander Totta reopened the Portuguese market on 20 April with a Eu1bn seven year covered bond that was the first benchmark from Portugal in 18 months. Banco Commercial Português (BCP) last sold a benchmark in 2009, a Eu1bn seven year.

Following the completion of a European roadshow last week, BCP leads Mediobanca, Millennium BCP, Natixis, NatWest, Société Générale and UniCredit launched the five year obrigações hipotecárias (OH) with initial price thoughts of the 75bp area.

Guidance was later set at the 70bp area, before the spread was set at 65bp and the size at Eu1bn. The book closed at over Eu1.8bn.

“To get Eu1.8bn of orders is a fine result for a returning issuer from one of the trickier jurisdictions,” said a syndicate banker away from the leads, “even in this supportive, ECB-driven market.”

The deal is the joint-widest euro benchmark covered bond this year, with the other being a Eu750m OBG for CA Cariparma, but that was a 12 year, priced at 65bp on 14 March. The last benchmark with a wider spread was a Eu500m five year debut for Turkey’s VakıfBank in April 2016 at 250bp over mid-swaps.

Bankers said it was difficult to estimate fair value for the new issue because of a lack of comparable paper, with BCP’s last public covered bond maturing next month.

They noted the deal came well wide of Totta’s recent Eu1bn seven year OH, which was priced at 62bp over mid-swaps and seen trading at around 40bp, mid, today.

However, they said that BCP would be expected to trade wide of Totta, which is one of the tighter-trading Portuguese names, benefitting from being part of the Santander group and better rated. BCP’s covered bonds are rated A3/BBB+/A (Moody’s/Fitch/DBRS), while Totta’s are rated A1/A/A.

Joost Beaumont, senior fixed income strategist at ABN Amro, said the covered bonds of Caixa Geral Depósitos are a more appropriate comparable for BCP’s new issue, being rated Baa2/BBB/A. He cited CGD January 2022s at around 60bp, mid.

Tomorrow is expected to be the last available window for euro covered bond issuance this week, with Thursday a public holiday in some European countries. The market is then not expected to reopen until next Tuesday, with Monday a public holiday in the UK.