A relatively attractive spread and yield on a triple-A rated EUR500m no-grow seven year Slovenská sporiteľňa euro covered bond debut enabled the Slovak bank to generate a three times subscribed book and tighten pricing 6bp today (Wednesday).

After teeing up launch yesterday, leads Commerzbank, DZ, Erste and UniCredit went out with initial guidance of the 25bp over mid-swaps area for the EUR500m no-grow seven year issue. A syndicate banker at one of the leads said the deal progressed very steadily, and books exceeded EUR1bn after around an hour and a half. After two and a half hours, with books above EUR1.4bn including EUR80m joint lead manager interest, guidance was revised to 20bp+/-1bp, will price in range. The spreads was ultimately set at 19bp on the back of book above EUR1.6bn, including the JLM interest, pre-reconciliation, and the lead banker said some EUR1.5bn was allocatable at re-offer.

“It was a very good deal,” he said. “The issuer is happy and so are we.”

Syndicate bankers away from the leads said the trade appeared to have gone well, noting the demand and tightening.

“They even achieved pricing inside VUB,” added one.

The first Slovak euro benchmark, a EUR500m March 2024 from Všeobecná Úverová Banka (VUB), was quoted at around 20bp-21bp over, mid, while Slovenská sporiteľňa could achieve the tighter spread despite the longer maturity. Bankers at and away from the leads pointed to the Aaa expected rating of Slovenská sporiteľňa’s deal, versus VUB’s Aa2.

The deal was pried with a 0.125% coupon to yield 0.221%.

Distribution statistics were not available when The CBR went to press, but a banker away from the leads said he expected LCR buying by bank treasuries to constitute the backbone of demand.

“They are desperately looking for the higher spreads that they can find in such trades,” he said, noting that the credit is positioned somewhere between core European and southern European credits.

The lead banker agreed that the deal benefited from being triple-A rate and meeting regulatory criteria such as LCR Level 1 and ECB repo eligibility, yet paying some 20bp more than core credits such as parent Erste Group.

“This made it particularly attractive as long as you got your heads around the Slovak landscape,” he added. “If you did, you had to buy.”

The deal is the first euro benchmark covered bond in a week, and one banker said the deal had taken advantage of markets being more favourable today than recently.

“It shows that investors have to put their cash to work,” he added. “If broader the market looks like it today, that is a window for issuance.”

He said that one or two issuers could follow quite soon, possibly on Friday, as long as there are not negative surprises from an ECB meeting tomorrow (Thursday).

However, another banker questioned whether much could be read into the reception enjoyed by Slovenská sporiteľňa.

“How would things look for a German, Austrian or Dutch name?” he said. “Rates-wise we are even lower.

“It reminds me of when the Germans could only do eight years or longer because of the negative yields.”