Oma Savings Bank attracted new investors to its covered bonds today (Wednesday), after adopting a conservative approach to initial guidance for its second sub-benchmark, a EUR300m five year deal that was set above the minimum size target in an otherwise quiet euro covered bond market.

The Finnish issuer finished a roadshow for the planned deal on Friday and yesterday (Tuesday) said it planned to launch a EUR250m minimum five year issue as early as today, after having waited out market volatility on Monday.

Leads Danske, LBBW and OP went out with initial guidance of the mid-swaps plus 19bp area for the new issue this morning. After an hour and a half they reported books above EUR500m, including EUR45m joint lead manager interest, revised guidance to 16bp+/-1bp, WPIR, and set the size at EUR300m. The books were closed with orders above EUR560m, including JLM interest, and the spread fixed at 15bp.

Oma’s new issue follows recent sub-benchmarks for peers the Mortgage Society of Finland (SuoHyp) and Alandsbanken, and Oma’s pricing of 15bp over compares with pre-announcement levels of 13.5bp, mid, for the former’s seven year and 12.5bp for the latter’s five year, while SuoHyp June 2024 paper was quoted at 10.5bp and Oma December 2022 paper at 6.5bp.

A syndicate banker at one of Oma’s leads said they had opted for a starting level of 19bp over to offer a pick-up over outstandings, even if the issuer’s credit quality is comparable to Alandsbanken’s, for example, with investor feedback having highlighted that Finnish curves are trading at tight levels. He noted that Alandsbanken’s issue on 12 March was barely subscribed and priced in the middle of guidance at 13bp over.

“Our strategy clearly paid off as we could tighten by 4bp and fix the pricing at 15bp,” said the banker, “and we ended up with a book that was still healthily oversubscribed.”

He said the market helped, with conditions remaining favourable after the poor start to the week – even if yields dropped sharply later in the day – and the issuer benefiting from there being no competing supply.

Distribution statistics had not been finalised by mid-afternoon, but the lead banker said that – in line with pre-launch feedback – LCR accounts drove demand, with around 40% of the trade going to banks. Central banks and official institutions also took a large share, of 40%-50%, which he said was “certainly a surprise”.

German and Austrian investors took some 40%-45%, with the rest concentrated among the Nordics, although only half of that being domestic Finnish placement, according to the lead banker. Around 37 accounts participated.

“For a smaller name, it is important to get a broad distribution, and we had a whole bunch of investors Oma hadn’t seen before in its issuance, so from that perspective it was certainly a success, said the lead banker.

Oma’s only other sub-benchmark was a EUR250m five year deal in December 2017 that was increased by EUR100m in June 2018.