A Eu1bn 10 year OBG for Intesa Sanpaolo was today (Wednesday) priced in the middle of guidance and just subscribed, and although the price was considered reasonable, bankers blamed encroaching weakness in the long end and renewed political uncertainty in Italy.

The new issue is only the second benchmark covered bond out of Italy this year, following a Eu1.5bn dual tranche, eight and 12 year for CA Cariparma on 14 March. Supply dried up in the run-up to the country’s constitutional referendum in November, while overall peripheral issuance has been low.

Intesa Sanpaolo leads Banca IMI, Barclays, LBBW, Natixis and UniCredit launched the 10 year obbligazioni bancarie garantite with guidance of the 38bp over mid-swaps area this morning. The spread was later fixed at 38bp and the size at Eu1bn, with the final book reported at over Eu1bn.

Syndicate bankers away from the leads said the deal had struggled, given the lack of movement in the pricing and the marginally oversubscribed book.

“Obviously it’s a good size – but it is relatively standard for the top Italian or Spanish names to print in size anyway,” said one. “It will be interesting to see how it does on the secondary market, to see whether they decided to push the size.”

The deal is the tightest benchmark OBG in any maturity since October, when CA Cariparma priced a Eu750m eight year at 21bp, and the tightest with a maturity of 10 years or longer since September, when UBI Banca priced a Eu1bn 10 year at 19bp.

Syndicate bankers away from the leads said the price seemed fair, taking Intesa’s secondaries into account. They said the issuer’s curve is distorted, with some of its longer dated outstandings being older, high coupon bonds, but estimated that the deal offered a new issue premium of around 8bp. They cited Intesa Sanpaolo March 2023s at 8bp, January 2025s at 20bp, mid, December 2025s at 25bp, and February 2026s at 23bp.

The new issue was also priced well inside the eight and 12 year tranches of CA Cariparma’s more recent OBG offering, which were priced at 53bp and 65bp, respectively, in March. The eight year tranche was seen today at around 35bp, mid, and the 12 year at around 53bp.

Bankers said this differential was appropriate, however, as Intesa trades well inside Cariparma in the intermediate part of the curve, even though their OBGs have the same rating – Aa2 from Moody’s.

“It’s an interesting comparison, but I don’t think investors would have been looking at Cariparma as a direct comparable,” said one. “I doubt that was the problem.”

Instead, bankers noted that some weakness has set in in certain recent longer dated issues. Yesterday, a Eu1bn 12 year covered bond for BPCE and a Eu1bn 10 year for OP Mortgage Bank were deemed relatively modest results, attracting Eu1.4bn and Eu1.3bn of orders, respectively, and were each seen trading at re-offer or slightly wider today.

This came after a 15 year covered bond for Westpac, priced on 11 May, also widened 1bp-2bp on the secondary market – while recent intermediate to shorter dated deals have performed more strongly.

“Although Westpac is a different jurisdiction, it feels like some accounts saw the poor performance in that bond and have become a bit more cautious about the longer dated stuff,” said a syndicate banker. “Since then, demand has been slightly lower than perhaps was expected.”

Bankers speculated that in the case of Intesa this caution combined with concerns about the jurisdiction. Earlier this week, worries about the possibility of early elections taking place in Italy in the autumn prompted a sell-off in Italian bank shares. This was added to by long-standing concerns about the country’s banking sector.

“Given that combination of factors, maybe investors felt the spread wasn’t generous enough,” said the syndicate banker. “Time will tell if in fact this was a good time for Intesa to do this deal, anyway.

“If the sell-off continues for another two or three weeks, it won’t look such a bad idea.”

The new issue was also priced around 100bp inside the Italian sovereign, with the 10 year BTP at around 140bp, bid, today.

“That can’t have helped,” he said.