Raiffeisen Bank International AG (RBI) drew over €1.1bn of demand to its inaugural euro benchmark covered bond today (Monday), a €500m no-grow 10 year whose 11bp spread and positive yield helped attract investors to its “newcomer flavor” in spite of the approaching year-end.

After on Thursday completing a roadshow and on Friday teeing up launch early this week, RBI leads DZ, Mediobanca, RBI and SG this morning went out with guidance of the mid-swaps plus 14bp area for the €500m no-grow 10 year benchmark. After around an hour and five minutes they reported books over €700m, including €20m joint lead manager interest. After around two hours, the spread was fixed at plus 11bp on the back of over €1bn orders, including €45m JLM interest. The deal was ultimately priced at plus 11bp on the back of over €1.1bn of demand good at re-offer.

A syndicate banker away from the leads said that the deal had performed well in the context of being so close to year-end.

“Overall it worked out quite well,” he said, “going from the plus 14bp area to 11bp, and they had somewhere around 50 lines of investors, which is quite good for an inaugural.”

He said that although the transaction was well-anticipated following a lengthy roadshow, it was unclear why the issuer came to market now, when the market has not been as strong as it was.

“Maybe if they’d done the trade a little earlier in the year they would have had more involved,” he said, “as some investors have already closed books, but it’s still quite strong for the end of the year, and a nice starting point for the curve that they can build up next year.”

The syndicate banker added that the deal paid “quite a bit of premium” over other Austrian covered bonds due to the issuer’s cover pool, which comprises mainly commercial real estate and significant exposure to central and eastern Europe.

“It makes sense for investors, especially at this time of the year, to ask for a premium versus the likes of Erste, Bawag, UniCredit Austria, etc,” he added.

According to pre-announcement comparables circulated by the leads on Friday, UniCredit Bank Austria March 2029s were trading at 4bp over, Erste September 2029s at 2.5bp, and RLB NOe-Wien January 2029s at 3.5bp.

A syndicate banker at one of the leads said that the trade had gone more or less in line with other recent transactions, with the added benefit of some “newcomer flavour”.

“It’s not exactly typical to have a first time issuer at this time of the year,” he acknowledged, “but as to be seen from today’s transaction, the market is still receptive and from that end, this was a very nice effort from the friends from Vienna.”

He said that the pricing at plus 11bp represented 3bp of new issue premium, which could be explained by a trio of factors.

“Firstly, it reflects that there’s always at least 1bp of new issue premium required,” he said, “then you consider that it’s a new player, and finally that its cover pool requires a bit of extra explanation, which we thought should be rewarded.”

He added that after initially considering a maturity of between seven and 10 years, the issuer opted for the greater length on the basis of investor feedback.

“It became pretty obvious that despite the fact people are used to buying negative yields, they preferred something in terms of positive return,” he said, “and the sevens wouldn’t have done the trick, eight probably neither, so we opted for 10, which is a nice number for a new issuer.”

The deal was priced to yield 0.176%, and a syndicate banker at another of the leads said that in the current market, a covered bond with a high rating – RBI’s has an expected rating of Aa1 from Moody’s – and a positive yield can be difficult to find.

“This is a good combination,” she said, “and clearly it received a very warm welcome from the investor base.”