BPER took the exceptional step of increasing a “EUR500m no-grow” deal today (Monday), but did so after building a EUR3bn book for what was ultimately a EUR600m seven year OBG. Nordea meanwhile attracted some EUR2.4bn of orders to achieve the tightest non-German benchmark since October.

BPER Banca leads Banca IMI, BNP Paribas, Crédit Agricole, HSBC and NatWest opened books on what was initially described as a EUR500m no-grow seven year obbligazioni bancarie garantite (OBG) with initial price thoughts of the 105bp over mid-swaps area at around 9.30 CET this morning, and demand surpassed EUR1bn in around half an hour. After an hour orders were in excess of EUR2bn and guidance was set at 90bp-95bp, WPIR, with the EUR500m no-grow language repeated and the books due to close around a quarter of an hour later.

With books in excess of EUR3bn, pre-reconciliation, the pricing was fixed at 90bp over and the size at EUR600m, with the leads saying that the “issuer facilitates small increase given exceptional demand”. More than EUR2.9bn of orders were reported as being good at re-offer in the final book.

A syndicate banker at one of the leads said that although a couple of investors said, “C’mon guys!”, the move was not deemed non-investor friendly, but the opposite, with the level of oversubscription meaning that more accounts would be frustrated by the original size. He said the increase of EUR100m to EUR600m was “not tricking investors”, as a larger increase to EUR750m or EUR1bn might have appeared.

The ECB announced a new series of TLTROs on Thursday and the syndicate banker said that this gave a boost to the new issue.

“The timing post-ECB gives this a little more impetus given that Italian and southern European banks in general are more likely than others to participate in TLTRO III, so there will be less supply of names like BPER,” he said. “That has fed through to where OBGs have been marked in the past couple of days, around 2bp tighter.

“We already saw the recent OBGs for Intesa Sanpaolo and UBI Banca attract a lot of interest and price close to fair value, and we felt we could expect a similar reception for BPER even if it is less well known.”

BPER July 2023s were seen at 76bp-77bp, mid, pre-announcement, and the lead banker said this implied fair value of 90bp or the low 90s over mid-swaps for the new seven year. However, he noted that this offered a pick-up over other Aa3 rated issuance, while UBI long sixes were quoted inside 50bp, after having been issued at 70bp over in mid-February.

OBGs were also offering better relative value versus BTPs today than recently, he added, with BPER coming 82bp through rather than the 100-plus spreads of other Italian issues.

“The triple-digit starting spread is naturally attractive,” said the lead banker, “and was fair versus fair value, while the size also helped. Then once we got to EUR1bn of orders so quickly we were able to tighten in the price and ultimately come flat to slightly through fair value.

“It was a very, very strong transaction in the end.”

A banker away from the leads said that market conditions were also supportive, with conditions improving from the end of last week when there was “a little bit of a shock” from both the timing and dovishness of the ECB’s announcement and then disappointing Non-Farm Payrolls on Friday.

“Risk assets bounced back today with a reasonably optimistic opening,” he said.

Nordea Mortgage Bank also entered the market today, with Credit Suisse, Deutsche, LBBW, Natixis and Nordea going out with IPTs of the 8bp area for a seven year euro benchmark this morning. Books were above EUR1.5bn after around three-quarters of an hour, and guidance was revised to 5bp+/-1bp, WPIR, after an hour and a half with books above EUR2.4bn. The spread was fixed at 4bp after a little over two hours, with books above EUR2.5bn, and the deal was sized at EUR1.5bn.

The benchmark is the Finnish issuer’s first since a EUR1bn seven year in May 2018. It is the tightest non-German benchmark covered bond of the year, and the tightest non-German benchmark since a SG SFH EUR750m seven year on 20 November.

“I sort of expected this to go well,” said a syndicate banker away from the leads. “Nordea hasn’t been yet this year and it has a great following.

“We are back to the previous, pre-CBPP3 hierarchy now, with German and Finnish names the absolute tightest.”

He said that while Nordea’s curve might imply fair value of 1.5bp-2bp over, Finnish secondaries are trading artificially tight, and that based on more recent issuance from the likes of Rabobank and OP Mortgage Bank, the deal came flat or almost flat to fair value of 3bp-4bp over.