Oma Savings Bank generated its biggest covered bond book today (Wednesday) as its €250m seven year sub-benchmark attracted €1.24bn of demand, close to that achieved by Stadshypotek on a €1bn eight year deal yesterday, with bankers citing the pick-up on offer among factors in its favour.

After announcing the mandate on Monday and concluding marketing yesterday (Tuesday), Oma Savings Bank leads Danske, LBBW and Swedbank this morning went out with guidance of the mid-swaps plus 14bp area for a seven year euro sub-benchmark transaction. After around an hour, guidance was revised to 11bp+/-1bp, WPIR, on the back of over €700m of demand, excluding joint lead manager interest, and the issue was sized at €250m. After around an hour and a half, the spread was set at 10bp, on the back of orders in excess of €1.2bn, including €40m JLM interest, good at guidance, and the final book at re-offer was €1.24bn, including €40m JLM interest.

A syndicate banker away from the leads said the Finnish transaction had gone well, citing the level of demand it received.

“It obviously comes at a pick-up versus the other Finnish names,” he said, “but they still got a hefty book for a sub-benchmark.”

A lead banker said the transaction gained strong momentum from the outset, and ultimately involved a high number of accounts, with orders almost equal to the €1.35bn-plus achieved by Stadshypotek’s €1bn eight year benchmark yesterday.

“That’s totally weird and should never have happened,” he said, “but nevertheless, it’s a fact.”

The new issue represents Oma’s largest order book for a covered bond, with its previous three sub-benchmarks having attracted demand of around €500m-€600m.

“It’s not always been a slam-dunk for this issuer,” said the lead banker, “because it’s not always a given you’ll find strong take-up on these sub-benchmark deals.”

He put fair value at 10bp based on the issuer’s curve, implying no new issue premium. According to comparables circulated by the leads this morning, Oma December 2022s were at 2.4bp, mid, its April 2023s at 4.1bp and April 2024s at 5bp.

“It offers quite a bit of premium to other Finnish stuff,” he said, “which is trading very rich, so in this sense you are really getting paid for it.”

Finland’s OP Mortgage Bank priced at €1.25bn 10 year issue at 2bp over mid-swaps last Thursday.

The deal succeeded in “hitting the sweet spot” for many investors according to a lead banker, being a triple-A rated covered bond with a popular maturity and offering a pick-up to its compatriots.

“Additionally, in a market like this, I don’t think you’re getting penalised much for being a sub-benchmark,” he said. “At the end of the day, people don’t see much difference in liquidity whether it’s a €500m or a €250m – it’s all quite illiquid anyway.”

Oma was originally planning for a five year deal, according to its initial announcement on Monday, but in an update yesterday afternoon switched to a seven year. The lead banker noted that Oma was flexible and happy with a longer duration, while investors are able to buy longer dated paper with a little extra yield.

“It works well for both parties,” he said.

Another banker did not rule out the possibility of further Nordic issuance before year-end.

“It’s a question of whether they do it now or rather wait for the more traditional January window,” he said, “but I wouldn’t be surprised if we saw another Nordic issuer in 2020.”