Hypo Tirol achieved its biggest book for a euro benchmark today (Thursday), attracting over €1.25bn of orders to a €500m no-grow 10 year debut social covered bond following IPTs that erred on the side of caution, after its previous two euro benchmarks were launched against difficult backdrops.

After on Tuesday announcing the mandate and starting investor calls that concluded yesterday (Wednesday), Hypo Tirol Bank leads ABN Amro, DekaBank, Erste, LBBW and UniCredit this morning went out with guidance of the mid-swaps plus 9bp area for an inaugural €500m no-grow 10 year social mortgage Pfandbrief. After around 55 minutes, books were reported as being over €1bn, excluding joint lead manager interest, and after around an hour and 35 minutes, guidance was revised to 5bp+/-1bp, WPIR, on the back of over €1.3bn of orders, excluding JLM interest. The deal was ultimately priced at 4bp, with the final book good at re-offer above €1.25bn, including €115m JLM interest.

Hypo Tirol launched its first euro benchmark in February 2016 when Austrian banks were suffering from Hypo Alpe-Adria-Bank/Heta fall-out and attracted just €550m of orders to its €500m debut (which matured last month). It then hit the market in October 2019 as demand for covered bonds dried up and struggled to achieve full subscription.

Following those two benchmarks, the two-and-a-half times subscription level for the new issue today was deemed a success.

“If you look at the orderbook at the end, they obviously did very well,” said a syndicate banker at one of the leads, “and considering the results of their previous transactions, the issuer is really happy with the outcome.”

Syndicate bankers at and away from the leads put fair value at 3bp-4bp, implying zero to 1bp of new issue premium for the Aa1 rated issue.

A banker away from the leads said the guidance of 9bp for the social bond appeared generous given that Norway’s SR-Boligkreditt – also not a national champion and, further, not CBPP3-eligible – started at the same level for a larger, €1bn 10 year yesterday that was ultimately price at 5bp. Another said the resulting 5bp move from start to finish by Hypo Tirol was “punchy”, if justified.

The lead banker said the issuer decided to set the guidance at the 9bp area to play it safe, bearing in mind its previous experience.

“We also saw a bit more rates volatility overnight and that weighed a bit on risk sentiment this morning,” he said.

The deal would have succeeded similarly if the guidance had been 1bp tighter, he added.

“In the end, it was more like, let’s de-risk it, and if we land at 5bp, OK, but if we land at 4bp, that’s perfect.”

One of the non-lead bankers acknowledged the thinking behind the strategy, particularly with Hypo Tirol being one of the lower profile Austrian issuers.

“A good transaction, no doubt,” he said, “not exuberant, but very solid, so congratulations to Tirol.”