Banco Desio reopened the peripheral covered bond market with a Eu500m seven year OBG today (Tuesday) that attracted over Eu1.6bn of orders. While the spread was tightened a “fair” 8bp from initial guidance, the deal was still seen as offering an attractive pick-up versus established Italian names.

The new issue is the first benchmark covered bond from the periphery since 31 May, when Intesa Sanpaolo priced a Eu1bn 10 year OBG.

The Italian bank’s debut has been awaited since Banco Desio e della Brianza established a Eu3bn soft bullet programme in July, and comes after an investor meeting in Milan on Thursday.

Leads Banca IMI, BNP Paribas, Natixis, SG and UniCredit launched the Eu500m no-grow obbligazioni bancarie garantite with guidance of the 65bp over mid-swaps area. Guidance was revised to 60bp plus or minus 3bp, before the spread was set at 57bp on the back of over Eu1.6bn of demand.

“From the outside, this looks like a very good outcome,” said a syndicate banker away from the leads. “The strong book probably reflects investors’ long wait for peripheral paper and a rather attractive price.”

The final spread is the widest offered by a euro benchmark covered bond since 23 May, when Banco Commercial Português priced a Eu1bn five year OH at 65bp over mid-swaps.

Bankers noted that the deal offered a substantial pick-up versus similarly-rated benchmark OBGs in the intermediate part of the curve, citing Banca Popolare di Milano June 2023s (rated A1 by Moody’s) and Banca Popolare di Sondrio April 2023s (rated AA by Fitch) at around 45bp, mid, today. Banco Desio’s covered bonds have an expected rating of AA- by Fitch.

“It is relatively juicy, but it was also quite wise on the issuer’s behalf not to be too greedy with the spread for a debut like this, and given the relatively low liquidity in the secondary market,” said a syndicate banker away from the leads. “In that context the 8bp move from the initial guidance to the re-offer seems fair, as it is still a good price for investors and a decent result for a new issuer.”