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Sparebanken Vest gets size and price as rally sustained

Sparebanken Vest issued the first euro benchmark of the month today (Wednesday), a EUR750m seven year trade that is the Norwegian issuer’s largest covered bond, as it took advantage of a quiet market to benefit from the sustained rally and achieve pricing flat to fair value.

Sparebanken Vest HQLeads Deutsche Bank, HSBC, ING, Nordea and UniCredit went out with guidance of the mid-swaps plus 18bp area for the seven year euro benchmark at around 8am London time and books surpassed EUR1bn in around 45 minutes. Guidance was revised to 15bp+/-1bp, WPIR, after around an hour and 20 minutes with demand above EUR1.5bn, excluding JLM interest.

The books were closed after a total of two hours above EUR1.8bn, excluding JLM interest, with the size set at EUR750m (NOK7.26bn) and the spread at 14bp.

Bankers at and away from the leads put fair value at 14bp over mid-swaps, implying that the issuer paid no new issue premium, based on the issuer’s curve but also taking into account recent Norwegian supply.

“They should be super-happy with the outcome,” said a syndicate banker not involved in the deal, adding that the pick-up of 1bp versus where Sweden’s SEB priced a EUR1.25bn seven year on Thursday was lower than it would historically have been for Sparebanken Vest.

The EUR750m size makes it Sparebanken Vest’s largest euro benchmark – according to a banker at one of the leads, the issuer had been considering a EUR500m-EUR750m range.

The deal is the fifth euro benchmark from Norway this year, with DNB and Sparebanken Sør having issued seven year trades and SpareBank 1 and Eika 10 years.

A syndicate banker away from the leads said that Norwegian credits were proving particularly popular among investors, not only in covered bonds but also other asset classes. He said that, having in recent years been characterised by German demand constituting half to three-quarters of orders, Norwegian covered bonds are now attracting a larger and broader investor base.

Sparebanken Vest’s deal is the first euro benchmark of February, with SEB’s seven year on the final day of a bumper January having been the last.

“They’ve benefited from a market that is on fire, with the rally from last week holding up,” said the lead banker. “We’re up about 30% this year in covered bonds in euros, but this week has been relatively quiet, so they’ve been able to do a nice drive-by, and get size without sacrificing anything on spread.”