Eurobank has become the latest Greek bank to tap capital markets, selling a covered bond that bankers say is designed to be eligible for ECB purchases.

The €500m bond, which matures in 2020, was priced this afternoon at a yield of just below 3 per cent. It represents the lender’s first foray into international markets in three years.

Covered bonds, a centuries-old form of European financing, are issued by banks and secured against pools of loans. As such, they provide investors with additional security in the event of default.

The Eurobank deal, which is backed by prime Greek residential mortgages, attracted orders in excess of €1bn. It is expected to be rated significantly below investment grade, at B3, by Moody’s.

The sale follows on from a successful €750m covered bond issue from National Bank of Greece earlier this month, which brought in over €2bn of orders, and marked the first Greek bank bond market borrowing since 2014.

The return to markets comes as the country’s troubled banking sector seeks to address the €100bn of non-performing exposures still sitting on its books.

Greek sovereign bonds are not eligible for purchases from the European Central Bank. The recent sales of Greek covered bonds have raised the question of whether the ECB could buy the securities, given the instruments make up a significant part of its asset purchases designed to stimulate the eurozone economy.

Barclays, Commerzbank, Goldman Sachs International, JPMorgan, Natwest Markets and UBS were on the deal.

Copyright The Financial Times Limited 2018. All rights reserved.

Comments have not been enabled for this article.