Nykredit Realkredit will today (Wednesday) price a Eu500m five year junior covered bond on the back of some Eu600m of orders that were placed since the order books were opened yesterday, with syndicate officials away from deal seeing the pricing close to senior unsecured levels.

Leads BNP Paribas, DZ Bank, JP Morgan and Nykredit Markets set initial price thoughts at 200bp-210bp over mid-swaps yesterday (Tuesday) and are understood to have gathered more than Eu600m of orders from more than 80 accounts. The deal will be priced at 200bp over, the tight end of guidance.

Syndicate officials away from the deal said the pricing largely reflected senior unsecured levels, with one putting it around 5bp-10bp tighter than a senior unsecured offering and therefore far removed from pricing for a covered bond.

Another said that while the deal was not a blowout it did well given the “mess” the market is in today after better conditions yesterday when the order books were opened.

“Given the nature of the product it’s not surprising that the bookbuilding took longer than expected,” he said, noting that investors would have needed time to do the credit work.

He said that he expects that the final distribution statistics will show that the deal was primarily taken up by Nordic accounts, given mainland European investors’ unfamiliarity with the asset class.

He said that a comparable Nykredit senior unsecured issue would come at 220bp-230bp over.

Junior covered bonds have been seen as a hybrid between covered bonds and senior unsecured debt, with junior covered bondholders having a secondary claim over the assets in a capital centre and ranking pari passu with senior unsecured investors in terms of a residual claim against the mortgage bank.