Banco BPM today (Tuesday) issued its first benchmark OBG since being formed by a merger of Banco Popolare and Banca BPM, attracting over EUR1bn of orders to a EUR750m seven year issue, with the deal’s attractive 40bp spread – the widest of the year so far – boosting demand.

Banco BPM announced a mandate for its seven year euro benchmark obbligazioni bancarie garantite (OBG) issue, via Banca Akros, Crédit Agricole, HSBC, Nomura, UBS and UniCredit, yesterday afternoon.

The deal was launched this morning with initial price thoughts of the low 40s over mid-swaps. Guidance was then set at the 40bp area on the back of more than EUR1bn of orders, including EUR25m joint lead manager interest. The spread was later set at 40bp with books over EUR1bn, before the size was fixed at EUR750m.

The deal is the third benchmark OBG offering of the year, following a EUR500m 20 year issue for Crédit Agricole Cariparma on 4 January and a dual tranche, EUR1bn six-and-a-half and 12 year issue for UBI Banca on Monday of last week (8 January).

“Demand has been rather modest for peripheral trades so far, as the three EUR500m trades for Cariparma and UBI each attracted demand of over EUR600m,” said a syndicate banker away from the deal. “In that context, to get substantially more demand for a lower rated trade is a very good result for BPM.”

BPM’s A1 rated deal is the lowest rated benchmark covered bond issued so far this year.

Bankers away from the leads said the deal’s success could be attributed to the fact its final spread of 40bp is the joint-widest offered by a euro benchmark covered bond since the start of the year, matching the spread of the EUR500m 20 year Cariparma issue.

Banco BPM began operations in January 2017 and was formed by a merger of Banco Popolare and Banca Popolare di Milano. Banca Popolare di Milano’s last euro benchmark OBG issue was in June 2016, while Banco Popolare’s last was in February 2015.