Banco Popular Español decided to reopen a March 2017 cédulas hipotecarias yesterday (Monday) with the aim of increasing the Eu600m issue to Eu1bn, thereby boosting the liquidity of the deal, and an official at the issuer said that the move has paid off so far.

Banco Popular corporate head office

The Spanish bank added Eu400m to the 4.125% March 2017 mortgage backed issue via leads BPE, Crédit Agricole, HSBC and Société Générale, who priced the increase at 205bp over mid-swaps, in line with guidance and initial price thoughts of the 205bp over area.

Santiago Armada, head of capital markets at Banco Popular, told The CBR that the issuer decided to launch the transaction because it felt that it was lacking in liquidity.

“We wanted to revive those transactions that could be lagging in liquidity because of their smaller size,” he said, “and felt that the March 2017 issue was a convenient maturity.”

The issuer achieved its aim of increasing the underlying issue to Eu1bn, and the move has had a positive effect on its cédulas curve, according to Armada.

“It worked really well,” he said. “Since today we see bids coming from most traders, which is a signal that the bond has the opportunity to tighten further and help our curve get to where it should be.”

He said that the March 2017s were bid 105.32 this (Tuesday) morning versus 105.12 yesterday, and that this is equivalent to a spread of around 203bp over mid-swaps. Its longer dated issuance has also benefitted, he said, with the issuer’s 2019s trading better.

BPE does not envisage returning to the public benchmark covered bond market with a new issue in the first half of this year, added Armada, but will aim to launch a deal in the autumn sometime.

Some Eu450m of orders for the cédulas were placed in less than one hour of bookbuilding, according to a lead syndicate official, with demand exceeding Eu500m when the order books were closed. Forty-five investors participated, with international accounts taking 56% of allocations.

Spain took 44%, the UK 23%, Germany 10%, France 7%, Portugal 6%, Nordics 5%, Switzerland 3%, and others 2%. Banks were allocated 51%, fund managers 30%, insurance companies and pension funds 13%, and private banks 6%.

Another lead syndicate banker said that at 205bp over, the tap was priced flat to 5bp back of where the underlying issue was trading mid-market before the tap was announced.

He said that market conditions were good at the time the tap was launched, but deteriorated later in the day, with cash and indices wider and stock markets falling.

A banker away from the deal said the tap was tightly but correctly priced.