A more than three times oversubscribed Eu750m five year OBG for Italy’s Credito Emiliano yesterday showed improved confidence in the bank and Italy, according to an official at the issuer, who described the transaction as “stellar”.

Credito Emiliano’s first benchmark covered bond of the year was first marketed at the 95bp over mid-swaps area before the leads moved the spread to the 90bp over area, where official guidance was set on the back of a Eu1.5bn order book. The order books were closed just over an hour after they were opened, with the final book amounting to Eu2.5bn and involving 120 investors. Shortly thereafter the size was confirmed, and the re-offer spread was set at 88bp over.

Barclays, BNP Paribas, Credit Suisse, HSBC, and Société Générale were leads.

A syndicate official at one of the leads said that the issue was priced some 25bp through Italian government bonds, flat to 5bp through the issuer’s curve, and roughly flat to where a new five year for its peer UBI Banca would come.

He said that Credem’s OBG was around 3bp tighter today (Wednesday) and the best performing covered bond issue of the week. Five deals totalling Eu4bn have been priced this week, with Belgium’s KBC Bank and Germany’s Deutsche Kreditbank also in the market yesterday. The syndicate banker said that KBC’s deal, a Eu750m five year, is an outlier in that it has not tightened. (See below for DKB and KBC distribution statistics.)

No new covered bonds were announced today, although market conditions remain positive, according to the banker.

Credem’s obbligazioni bancarie garantite (OBG) issue came after Moody’s on Friday revised the outlook on Italy’s rating (Baa2) from negative to stable, which the issuer took as a signal to go to market after having been eyeing it for a week or so.

“We were in the right place at the right time,” Gabriele Minotti, head of ALM and funding at Credito Emiliano, told The Covered Bond Report. “This was a stellar performance.”

The bank is pleased overall with the level of foreign investment in the transaction, with domestic accounts taking only 36% of the bonds, said Minotti.

Gabriele Minotti, Credito Emiliano

Germany and Austria took 35%, the Nordics 6%, France 5%, Switzerland 5%, the UK 4%, Spain and Portugal 4%, the Benelux 2%, and Asia 1%. The involvement of Asian accounts was particularly notable, according to Minotti, given that it was the first time the continent has participated in a Credito Emiliano OBG.

“The level of foreign investment shows that confidence has improved in both the bank and the country,” he said. “We are one of the few Italian banks to print at a double-digit spread and this is a good sign going forward.”

Fund managers took 63% of the bonds, while banks took 27%. The remaining share was divided up between insurance companies and pension funds (4%), central banks (2%) and others (4%).

Minotti said that the bank intends to issue more frequently.

“We are planning to issue again in the second half of the year, following the maturity of an OBG in June,” he said. “Being on the market frequently is important as it improves customer confidence in the issuer and reduces the need to roadshow without losing the assurance of customer reception.”

The issuer is also aiming to further scale bank financing from the European Central Bank, which is at Eu3bn after Eu2bn was repaid last year, according to Minotti.

KBC Eu750m 1% February 2019

Orders totalling Eu1bn across 80 accounts. Germany and Austria 57%, Benelux 14%, UK and Ireland 9%, Nordics 8%, Central Europe 5%, Asia 5%, France 1%, southern Europe 1%. Banks 64%, asset managers 24%, central banks 12%.

DKB Eu500m 1.375% February 2021

Orders totalling around Eu800m with more than 60 accounts. Germany 88%, Asia 4%, Switzerland 3%, UK 2%, Austria 1%, Benelux 1%, and Italy 1%. Banks 34%, asset managers and funds 30%, savings banks and Landesbanks 26%, central banks 6%, and insurance companies 4%.