Raiffeisenlandesbank Oberoesterreich received more than fourfold demand for a €500m five-year mortgage-backed bond on Wednesday as it restarted covered supply after the Easter break.
The trade was very similar to the three-times subscribed €750m five-year covered bond RLB Noe-Wien printed at mid-swaps plus 8bp before the long weekend.
"Noe-Wien was a bit of an ice-breaker, given that it was the first trade with a Raiffeisen flavour following the beginning of the Russian invasion [of Ukraine] and the [exposure] trouble related to the RBI name which might have spilled into the factor as a whole," one banker said.
"Noe-Wien last week demonstrated that this was not the case and now Oberoesterreich has had a slightly easier trade following in their wake."
DekaBank, Deutsche Bank, DZ Bank, Erste Group and Raiffeisen Bank International opened books for Oberoesterreich’s no-grow trade at plus 12bp area.
“Oberoesterreich and Noe-Wien are the two largest RLBs in Austria by balance sheet size. They’re also very similar in terms of how investors perceive them. So we started at plus 12bp just like Noe-Wien in order to have the same momentum, even though we saw that the Noe-Wien trade performed very nicely in secondary, having tightened by 2.5bp from reoffer level," a second banker said.
"We hoped we might end up a touch tighter due to the fact that Oberoesterreich are only issuing €500m and not €750m like RLB Noe-Wien."
In the end the leads were able to compress the final spread to plus 7bp on the back of orders passing the €1.6bn mark.
“We had a bit of price leverage here and eventually it has worked very nicely. The new issue premium is 2bp given that fair value is around 5bp," the second banker said. In comparison Noe-Wien conceded 3bp for its five-year covered bond.
The orderbook grew substantially after final terms were set, closing in excess of €2.25bn (€140m JLM) and drawing a good mix of bank treasuries and central bank money.
“The interest from real money is getting quite interesting given that yields continue to rise and the coupons that are achievable on these types of covereds are actually quite nice,” the second banker said. Both Noe-Wien and Oberoesterreich came with 1.25% coupons.
Sp Mortgage Bank also tapped the short end on Wednesday, leaving a little bit more on the table for an aggressively priced €300m three-year covered bond.
“They’re usually a benchmark issuer but were restricted in terms of deal size and duration – two to three years – because they are in the process of setting up a new covered pool due to a recent change in law,” a third banker said.
BNP Paribas, LBBW and Nordea began marketing the no-grow trade at mid-swaps plus 7bp area, while market participants gauged fair value within a 0bp-1bp range.
The leads garnered over €620m in orders (ex JLM) and landed at 4bp in the end, about 1bp wide of where a potential benchmark issue would come, according to the second banker.
“Plus 4bp as an absolute spread is fairly tight. It’s a higher new issue premium [than what RLB Oberoesterreich paid] but on the other hand it is a less frequent issuer,” the second banker said.
Further sub-benchmark issuance is on the cards in the covered bond sector with Hypo Tirol Bank gearing up for the launch of a €300m no-grow five-year via ABN AMRO, DekaBank, Erste Group and LBBW.
“Their outstanding October 2026 [covered] benchmark is trading around plus 6bp, it’s not much of an extension, hence we’re seeing fair value at plus 7bp - this includes maybe a little a bit of pick-up versus sub-benchmark. We will perhaps start a touch wider,” the second banker said. “It should be fairly similar in terms of execution to RLB Oberoesterreich, with the caveat that tightening will need to be somewhat less, given that this is a sub-benchmark and the pool of investors is smaller.”
Corrected story: Adds missing lead manager in fifth paragraph