Alpha Bank sold a “phenomenal” EUR500m five year covered bond debut today (Thursday), capitalising on dramatic performance in Greek yields to price inside preceding shorter-dated trades while attracting EUR2.3bn of orders, evincing the country’s expanding appeal.

The new issue completes the capital market comeback of the big four Greek banks, after National Bank of Greece, Eurobank Ergasias and Piraeus Bank each issued EUR500m covered bonds last October – the first Greek bank bonds since the country’s debt crisis.

“Alpha’s reintroduction to the markets has been phenomenal,” said a syndicate banker at one of the leads. “It was a very strategic transaction – the issuer had been targeting the new year, and that has paid off.”

Alpha Bank and leads Barclays, Citi, Commerzbank, JP Morgan and NatWest completed a European roadshow marketing a potential four to five year issue yesterday (Wednesday).

The EUR500m no-grow five year deal, marketed on a yield basis, was launched this morning with initial price thoughts of the 3% area. The leads later announced that orders had surpassed EUR2bn, and subsequently set guidance at 2.75%-2.875%, before pricing at 2.75% upon some EUR2.3bn of demand.

“It’s a huge success,” said the lead syndicate banker. “They really benefitted from the significant Greek rally, which allowed them to price a five year tighter than where their peers priced three year transactions.”

NBG reopened the Greek covered bond market on 10 October with a EUR750m three year, attracting over EUR2bn of demand. Eurobank followed with a EUR500m three year covered bond on 24 October, attracting EUR1.2bn of demand, and Piraeus on the same date priced a EUR500m five year private placement. The deals of NBG and Eurobank were priced at 2.90% and 2.98%, respectively, having been launched with IPTs of the 3.25% area.

Greek government bond yields have fallen dramatically since NBG and Eurobank tapped the market, and are now trading at their lowest levels in several years. The January 2023 Greek government bond was seen at a yield of around 2.82% today – having traded at around 4.58% in October.

Much of the performance came after hopes were raised that Greece will exit its bail-out programme this year. On Friday, S&P upgraded the sovereign from B- to B, prompting further performance in short-dated Greek government bonds, with the five year tightening 3bp on Monday.

Last year’s benchmark covered bond issues have also performed strongly, with NBG’s deal seen around 95bp inside re-offer and Eurobank’s deal around 75bp inside.

“Alpha’s timing is perfect,” said a syndicate banker away from the deal.

Bankers at and away from the leads said the new issue was priced around 7bp inside the January 2023 government bond. At the time of launch, NBG and Eurobank’s deals were priced around 80bp inside three year Greek government bonds.

Bankers at the leads said this differential was partly due to the different maturities of the deal and also due to the scale of the performance in the Greek sovereign.

“Greek covered bonds are moving, but just not as quick,” said one. “That differential is also more in line with the more mature covered bond markets.”

He noted as an example that in Spain BBVA trades around 10bp inside the sovereign, and in Portugal BCP trades around 15bp inside the sovereign.

Bankers away from the deal said the outright yield was attractive for secured debt.

“It’s a very juicy price for a covered bond, so it is not surprising this is so strongly oversubscribed,” said a syndicate banker away from the leads. “If I could buy this as a private investor, I probably would.”

Last year’s deals for NBG and Eurobank were the first sub-investment grade benchmark issues in the covered bond market. Like its compatriots’, Alpha’s covered bonds are sub-investment grade and are capped at the country ceiling, with provisional ratings of B3/B from Moody’s and Fitch.

Due to their ratings, last year’s deals for NBG and Eurobank attracted a large number of non-traditional covered bond investors, with asset managers taking particularly high shares.

However, bankers at the leads said Alpha Bank’s book included more traditional covered bond accounts that did not participate in the previous trades.

“The development in the investor base over the last three months has been significant, with much more traditional buyers of covered bonds coming into this space,” said one. “The granularity and diversity of the order book is the best we’ve seen in the Greek covered bond market, which shows the work done last year by NBG and Eurobank has brought more investors into this segment.”

Bankers added that another key attraction for investors was the deal’s maturity, with the five year tenor more popular than the three year used by NBG and Eurobank. The deal is the first Greek bank bond with a five year maturity for a decade.

Alpha Bank stated yesterday that its soft bullet covered bond programme has been structured with the objective of meeting eligibility criteria for the ECB’s covered bond purchase programme, and this had been confirmed by the issuer on a self-assessment basis. It noted that final eligibility for the programme is dependent on the ECB’s decision.

Greek and Cypriot covered bonds that are rated below investment grade are currently eligible for CBPP3 provided they meet additional criteria, including a minimum OC commitment of 25%. Alpha Bank announced yesterday that it would maintain OC at a minimum of 25%.

The ECB announced in November that, as of 1 February, CPT programmes of issuers that do not have a first-best investment grade rating will be ineligible for its covered bond purchase programme – with NBG and Eurobank affected.