Banco BPI attracted some €2.85bn of demand to a €500m no-grow long six year issue yesterday (Thursday), building on the reopening of obrigações cobertas by compatriot Santander Totta last week, with the only open question being whether the NIP was marginally negative or positive.

Following a mandate announcement on Wednesday, leads ABN Amro, parent CaixaBank, Commerzbank, HSBC, LBBW and UniCredit yesterday morning opened books with guidance of the mid-swaps plus 70bp area for the €500m no-grow March 2030 obrigações cobertas, expected ratings Aaa/AA (Moody’s/DBRS). After around an hour and a quarter, they reported books above €1.5bn, excluding joint lead manager interest, and after around an hour and 50 minutes, they set the spread at plus 64bp on the back of books above €2bn, excluding JLM interest. The book ultimately reached €2.85bn, excluding JLM interest, good at re-offer.

BPI’s new issue came after Banco Santander Totta had reopened the Portuguese market for 2024 with a €1bn seven year at mid-swaps plus 67bp on Wednesday of last week (7 February) on the back of a book above €2.5bn.

“To me, BPI was always going to be a strong trade,” said a syndicate banker away from the leads, “because Totta had an extremely strong transaction and they aimed for something a bit shorter, but with the same kind of spread, and it worked out beautifully. It shows that there is significant interest in any kind of covered bond offering a little bit more spread and clearly something in six years at 60bp is really interesting for a lot of people.

“I imagine they got a high level of IoIs (indications of interest) on the first day,” he added, “because the IPTs they started with were a bit close to fair value versus what we have been used to recently. Although – with the benefit of hindsight – maybe they could ultimately have gone a little bit tighter because the book grew some €800m when they fixed it at 64bp.”

Santander Totta’s €1bn February 2031 issue, priced at 67bp, was trading at 64bp, mid, according to pre-announcement comparables circulated by BPI’s leads, while Santander Totta April 2028s were seen at 49bp and BPI July 2028s – issued last June – at 55bp.

The leads put fair value in the mid-60s, implying a potentially negative new issue premium of up to 1bp, but some syndicate bankers away from the leads put fair value closer to 62bp, implying a NIP of around 2bp, arguing that the leads’ calculations implied too steep a curve.

“If you have a €2.8bn book,” said one, “chances are you left a bit on the table.”

Another syndicate banker said the success of the Portuguese covered bond supply had been boosted by Moody’s upgrading Portuguese covered bonds en masse to triple-A in November.

“It’s not like you get an extra billion of demand,” he said, “but you still have some investors who clearly much prefer to buy only triple-A when it comes to covered bonds. So you get more people looking at it – central banks and official institutions in particular sometimes need the triple-A.”

The Portuguese new issue was only the second euro benchmark covered bond to have been launched this week – after SR-Boligkreditt sold a €500m eight year on Monday – making it the quietest week of 2024.

“It was abnormally quiet,” said one syndicate banker, “but there is more expected for next week, even if it won’t be by any means close to what we had in January.

“There should be some drive-bys and some more marketing-focused names, so a few interesting things to look forward to.”