Caixa Geral de Depósitos launched a Eu750m five year deal that is the first Portuguese benchmark covered bond since 2010 today (Friday), while Banco Sabadell placed a Eu1bn transaction on the back of a market where peripherals have been performing strongly.

Today’s deals mean that Italian, Portuguese and Spanish issuers have all tapped the benchmark covered bond market this year.

“Everything is again driven by the imbalance between supply and demand,” said a syndicate banker involved in one of today’s deals, “and people are just getting crazy.

“It is compression, compression, compression. I’m just waiting for the day when a peripheral breaks through the triple-digit spread level.”

Another syndicate banker said that while the market may appear too bullish, the positive tone is set to continue at least into next week.

“We don’t yet have time to sit back and think too much,” he said. “Too much cash is still there and needs to be invested in the first wave.”

For Caixa Geral, leads Caixa Banco de Investimento, Commerzbank, Credit Suisse, Société Générale and UBS set initial price thoughts at the 4.125% yield area, then guidance at the 4% area, without having initially set a target or minimum size for the deal. The issue was then sized at Eu750m on the back of strong investor demand, with the order book approaching Eu4bn.

A syndicate official away from the leads put IPTs as equivalent to the 315bp over mid-swap area, and re-offer spread at about 285bp over. A syndicate official at one of the leads confirmed the 285bp over mid-swaps level, which he said was equivalent to a yield of 3.8%-3.85%.

A banker away from the leads said that marketing the deal on a yield basis may have made the deal more “optically” attractive, and that it was in line with how Portuguese senior unsecured issues had been done.

The deal is the first Portuguese benchmark covered bond since 2010.

“It’s a cracking success,” said another syndicate banker away from the leads.

He added that it was “fair play” for Portuguese banks to issue senior unsecured first, and then move to covered bonds. When Banco Espírito Santo reopened Portuguese FIG issuance after two years in October it did so with a Eu750m threee year senior unsecured trade and since then Portugal’s banks have focused on senior unsecured.

“This issuance is an important step in the rehabilitation of the Portuguese names,” added the syndicate banker.

He said that the trade was priced around 105bp through Portuguese government bonds, similar to levels achieved in recent Italian trades.

“It’s a decent clip inside the sovereign,” he said.

He added that the timing of the deal was right considering the strong market conditions.

“There is just an overwhelming amount of cash to go into the market,” he said. “Allocation is going to be though, as it was for UniCredit’s seven year.”

The Eu1bn Italian deal attracted some Eu6.5bn of orders.

Another peripheral issuer, Banco Sabadell, also came to market today, with a Eu1bn no-grow five year trade that attracted around Eu3.4bn of orders.

Leads Banco Sabadell, Crédit Agricole, Deutsche, JP Morgan and Santander tightened the spread from initial price thoughts in the 275bp-270bp area to 250bp over.

A syndicate banker away from the leads said the positive result was not difficult to forecast after yesterday’s move by Bankinter, which placed a seven times oversubscribed Eu500m three and a half year issue at 220bp over mid-swaps (see separate article).

He added that the choice of a five year maturity for both Banco Sabadell and Caxia Geral was appropriate as the market proved to be open to longer dated peripheral issuance.

“If peripherals were able to issue two and a half or three year senior unsecured,” he said, “it’s not surprising that with collateral they can reach five years.”

After a week dominated by peripheral issuance, with Spanish, Italian and Portuguese issuers launching multiple times oversubscribed transactions, next week should see further issuance from core jurisdictions.

Aareal Bank this morning announced that it has mandated BNP Paribas, Commerzbank, DZ, NordLB and UniCredit to lead a five year euro benchmark that will be launched early next week, subject to market conditions.