LONDON, Nov 23 (IFR) - Italy's largest retail bank Intesa
Sanpaolo smashed through its government curve on Thursday,
selling the longest dated bond from a peripheral bank this year
some 110bp through BTPs.
The EUR1.25bn 10-year covered bond priced at mid-swaps plus
200bp, having initially been marketed at plus 220bp area.
Lead managers Banca IMI, Barclays, Deutsche Bank and Societe
Generale came under scrutiny during execution, as the final
order book soared past EUR5bn, rousing critics who maintained
that marketing should have begun at a much tighter level.
"The leads should have started with IPTs at 200bp area,
which would have allowed for a print at 190bp, the correct
level," said one.
Another shared that view and said: "I have no idea why the
leads felt they had to be so defensive on pricing. Intesa
September 2019 was at 160bp and the seven- to 10-year curve is
In support of this thinking, the bond has tightened by 13bp
in the secondary market on Friday, which one observer called
quite a big move for such a long-dated deal.
Bankers on the deal, however, were quick to point out that
they saw Intesa's January 2021s trading at around mid-swaps plus
200bp and, adjusting for the curve and a bit of new issue
premium, 220bp seemed like a sensible starting point.
One added that the 3.625% coupon offered by such a strong
credit ensured supply-starved accounts would get involved.
"This was obviously going to work," said a banker. "Intesa
was keen to demonstrate that they had access to the long end of
the curve and the results show just how desperate investors are
Intesa is the first bank to test investor appetite for
longer dated peripheral covered bond paper this year. Spanish
and Italian banks have been constrained at the short to medium
part of the curve until now.
However, the current search for yield means that investors
are now prepared to extend out the curve.
"This is a credit driven market, you just have to look at
the corporate bond issues," one head of FIG syndicate said. "The
same applies to anything that's high beta in the FIG world.
Investors want to get their hands on any stuff where there is
scope for performance."
Accounts in German & Austria took 38.4%, Italy 26%, France
19.3%, UK 5.2%, Iberia 3.8%, Benelux 2.8%, Nordics 2.5%, others
By account type fund managers took 54.4%, insurers 31.5%,
banks 13.3% and others 0.8%.
(Reporting by Aimee Donnellan; editing by Helene Durand &