The Swiss government's sale of a 9 percent stake in UBS drew lively bids, traders said on Thursday, with a price range seen above the stock's closing price in the previous session.
The Swiss had initially set a price range of 16 to 16.50 Swiss francs per share, but traders indicated a range at 17 to 17.25 francs, saying the books were three to five times oversubscribed.
That could net the government up to 5.7 billion Swiss francs ($5.3 billion), just below its original investment of 6 billion francs in mandatory convertible notes.
UBS will also pay the government 1.8 billion francs to compensate for lost interest rates it would otherwise have had to pay, leaving Berne in the black on the deal.
The Swiss National Bank said the government sale indicated the market was more confident in UBS, while Switzerland's financial regulator FINMA said it supported the sale since the bank now had a stable, sound capital base.
UBS shares were up 0.6 percent at 16.84 francs at 0758 GMT, having closed at 16.74 francs on Wednesday, while the DJ Stoxx bank sector index was up 1.44 percent.
The sale is being run by Credit Suisse, Morgan Stanley and UBS itself, traders said.
A Swiss Finance Ministry spokesman declined to comment on the placement, adding that details would be announced later on Thursday.
Switzerland said late on Wednesday it would sell the stake, saying a capital raising in June and the settling of a tax dispute with the U.S. had increased confidence in the bank.
The news came just hours after Switzerland agreed to reveal details of about 4,450 wealthy American clients of UBS to U.S. authorities in a tax dispute settlement that breaks the seal on Swiss banking secrecy.
Other Swiss banks, such as Credit Suisse, Julius Baer, Zuercher Kantonalbank (ZKB) and Union Bancaire Privee (UBP), are now fretting that the U.S. taxman's spotlight could fall on them, the Wall Street Journal reported.
(Additional reporting by Katie Reid, editing by Will Waterman)
($1=1.076 Swiss Franc)