Sp Mortgage Bank quickly gathered over Eu2bn of demand from over 100 investors to a Eu500m five year covered bond today (Tuesday) and ultimately priced what is only the Finnish issuer’s second deal inside its shorter dated outstanding amid a general “buying frenzy”.

Leads BNP Paribas, LBBW and Nordea launched the Eu500m no-grow five year issue this morning with guidance of the 2bp over mid-swaps area. Around one hour and 15 minutes later, guidance was revised to minus 2bp to flat, will price within range, on the back of over Eu1.5bn of orders. The books closed just over 20 minutes later at over Eu2bn, with the spread set at minus 2bp.

“The bookbuild was really fast,” said a syndicate banker at one of the leads. “This is only their second time in the market, but we had a really strong response this morning and the deal was quickly over three times subscribed.

“We then thought we wanted to balance this with the fact the issuer is still relatively new, so we did not want to tighten the spread too far and annoy investors. We felt the minus 2bp to flat range was fair, and the total move of 4bp is less aggressive than in some recent cases, with most issuers in recent weeks having moved 5bp-6bp.”

The lead syndicate banker added that around 100 investors were in the final book.

“That is an amazing result for a second time issuer,” he said.

The deal follows a Eu500m five year debut in November 2016. Sp Mortgage Bank held a five day European roadshow that ended on Friday.

The new issue was deemed to have been priced inside extrapolated fair value based on the issuer’s sole outstanding benchmark, with bankers citing the Sp Mortgage Bank November 2021s at minus 1.5bp, mid.

Bankers noted, however, that the deal offered a substantial pick-up versus the curves of more established Finnish issuers, with Aktia March 2022s seen at minus 11.5bp and 2022-2023 paper from Nordea Mortgage Bank and OP Mortgage bank at minus 14bp-13bp.

“There is no pick-up over the 2021s, and that is in line with recent transactions, which have also been flat to or slightly inside fair value,” said the lead syndicate banker. “If you look at the other Finnish curves, there is absolute value there because the Sp name trades cheap compared to the rest of the Finnish curve.”

A syndicate banker away from the leads said the price was “well-balanced”.

“They can be pleased with this outcome,” he said. “It should set them on the way to pricing closer to their peers.”

The deal is the first benchmark covered bond from Finland since 30 May, when OP Mortgage Bank sold a Eu1bn 10 year.

Bankers said the pricing of Sp Mortgage Bank’s new issue through fair value, and demand for a Eu500m 10 year issue for KBC today (see separate article), typified market conditions that remain strongly weighted in issuers’ favour.

“It seems so far, the ECB meeting next week and the upcoming QE decision don’t matter at all,” added a syndicate banker. “Everyone is just in a buying frenzy.”