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 not 40bp.”
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 for yield.”
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 2%.
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 & Julian Baker)