NIBC Bank launched the only euro benchmark covered bond this (Friday) morning, a debut, three year issue backed by a mix of Dutch and German residential mortgages, which is being priced at mid-swaps plus 105bp.

The issuer had been roadshowing with leads LBBW, Natixis, NIBC Bank and RBS from last Friday (18 March) until Tuesday. The books were closed at about 1320 CET with more than Eu1.1bn in orders for the Eu500m issue, after guidance was revised from the 110bp are to 105bp over.

“The transaction was excellent,” said a syndicate official at one of the leads. “It was a good transaction for the issuer to enter the market with and there are still some basis points that can perform in the secondary market.”

Pricing was a challenge, he added.

“It was pretty tough as NIBC is an inaugural trade, so there’s always a new issuer premium,” he said. “There were no perfect comparables.”

A syndicate official at another of the leads said that a triple-digit spread had been key to gathering momentum behind the transaction, and it was then a question of price discovery to get to the correct level. He said that the Netherlands’ Achmea Hypotheekbank could be seen as providing a reference; its 2014 paper was at around 90bp over mid-swaps.

However, a syndicate official away from the leads said that the offering looked very generous versus SNS Bank, with its 2015 paper at around 60bp over. He nevertheless acknowledged that the Aa2 rating from Moody’s of NIBC’s covered bonds contributed to explaining the much wider spread. The covered bonds are rated AAA by Fitch.

Dutch prime residential mortgages make up the majority of the cover pool, at 80%, with German residential mortgages accounting for the remaining 20%. One of the lead syndicate officials said that this was a plus.

“This kind of mix was well appreciated because of the diversification it adds,” he said, adding that the order book was of a high quality.

“They had some of the big guys playing in it,” he said, “which is good news for NIBC, given that it is not an easy name, infrequent, and with a sub-benchmark size.”