Bankinter today (Monday) attracted more than EUR1.5bn of orders to a EUR500m 10 year cédulas even while pricing the deal with no new issue premium, boosted by the issuer’s rarity – the deal being its first benchmark cédulas since 2015 – and strong Spanish momentum.

On Tuesday the Kingdom of Spain priced a EUR10bn 10 year bond at 46bp over mid-swaps upon some EUR43bn of orders. The blowout deal came after Fitch upgraded the Spanish sovereign from BBB+ to A- on 19 January, citing the country’s economic recovery and a limited economic impact from Catalonia’s bid for independence, which prompted a rally in Spanish rates.

Leads Bankinter, Deutsche, HSBC, Santander and SG launched the EUR500m no-grow 10 year cédulas with guidance of the mid-20s over mid-swaps area this morning. After around one hour and 20 minutes, the leads announced that orders had exceeded EUR1bn.

Guidance was subsequently revised to the 20bp area, plus or minus 2bp will price within range, upon EUR1.5bn of orders, before the spread was fixed at 18bp, with the book closing at above EUR1.5bn.

“It’s a very nice trade, with a very nice book and very nice granularity,” said a syndicate banker at one of the leads. “The price also impressive – some say it is a negative new issue premium, I say it is zero.”

Some bankers away from the leads said the deal was priced inside fair value, while bankers at the leads said it was priced flat to the issuer’s extrapolated curve, with both groups citing Bankinter February 2025s at 15bp-16bp, mid.

The deal is tightest benchmark cédulas with a maturity of 10 years or longer since March 2015, when CaixaBank priced a EUR1bn 10 year at 15bp over mid-swaps. Bankers noted that there was nevertheless no sign of price sensitivity in the book.

“That was a bit of a surprise to us, but there wasn’t,” said a lead syndicate banker.

The deal’s success was in part attributed to the positive momentum around Spain following the country’s upgrade and last week’s sizeable sovereign deal.

“Today proved to be a very good day to print Spanish debt,” said a syndicate banker away from the leads. “The rally in the govvie space clearly helped.”

They added that a rise in rates that began earlier this month and continued after an ECB governing council meeting last week has made longer-dated debt more attractive to investors.

The deal is Bankinter’s first benchmark covered bond since October 2015, and bankers said this was another reason for the strong demand.

“Bankinter are an issuer that have done very good deals in the past, but they don’t print transactions very often, so they benefit from that scarcity,” said the lead syndicate banker. “There has also been very little supply out of Spain, which all contributes to a successful trade.”

The new issue is the second benchmark covered bond from Spain since the turn of the year, following a EUR1bn 10 year for CaixaBank on 3 January. CaixaBank’s deal was priced at 22bp over mid-swaps and seen trading at around 18bp, mid, today.

Following today’s new issue, 2018 benchmark cédulas hipotecarias supply has already matched that of 2017 in terms of the number of trades, albeit not in volume. Only two euro benchmark covered bonds were issued out of Spain last year, an aggregate EUR2.5bn of supply from CaixaBank and Banco Sabadell.

Spanish issuers have been more focussed on TLAC/MREL-eligible issuance at the expense of covered bonds, and overall peripheral supply was limited last year after peripheral banks took a sizeable share of ECB TLTROs, reducing their funding needs. Spanish issuance is expected to be modest once again in 2018, but higher than last year.