Two new covered bonds from peripheral Eurozone issuers priced last week. The Italian Lender, Intesa San Paolo issued a €1.5 billion ($1.96 billion), 1.5-year unsecured bond at 295 basis points over mid swaps.

Meanwhile, Spanish issuer Banco Santander returned to the covered bond market with a €2 billion three-year mortgage covered bond at 210 basis points over mid swaps.

According to a Bank of America Merrill Lynch report, both issues were significantly over-subscribed. Santander priced its deal with a final book of nearly €9 billion.  

The success of the deals shows that investors have appetite for short-dated paper and also demonstrates the willingness for the strongest issuers to show their ability to access the capital markets instead of solely relying on cheaper funding from the European Central Bank, according to the BofA Merrill analysts said.

"We expect some of the strongest Spanish banks to follow Santander’s path," analysts said in the report.



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