DnB Nor Boligkreditt has issued its first Australian dollar benchmark covered bond and the first for a European issuer since the onset of the financial crisis, a A$600m (Eu446m) five year issue that exceeded the issuer’s target size and gave it more favourable pricing versus comparables than in the US dollar market.

The Norwegian issuer roadshowed in Australia in May. Leads ANZ, Deutsche Bank and HSBC built a A$700m book, thereby allowing the issuer to price more than a A$500m minimum.

“The target was to print a deal like this, with a A$500m minimum size,” Thor Tellefsen, senior vice president and head of long term funding at DnB Nor, told The Covered Bond Report. “For us it’s all about investor diversification.”

He said that the pricing was more or less in line with what DnB Nor could achieve in the US dollar covered bond market or in euros. The proceeds of the Australian dollar issue were swapped to dollar Libor at 61bp – DnB Nor issued a five year dollar benchmark at the end of March at 66bp over that has been trading in the high 50s.

The pricing of the new issue was 85bp over swaps in Australian dollar terms, in line with guidance. Tellefsen said that he was pleased to have achieved pricing within around 12bp of where Canadian covered bonds trade in the Australian market, given that this is a smaller premium than that paid by the Norwegian issuer in the US dollar market.

The issue is the first off a A$4bn covered bond programme that DnB Nor has established.

“We know it will take some time to reach this amount,” said Tellefsen, “but the aim here was to signal to investors that we will be in the market on a regular basis as long as the funding is competitive.”

Australian accounts were allocated 93% of the paper and offshore demand 7%. Bank balance sheets took 77% and fund managers 23%.

“The issue is RBA repo eligible – like all covered bonds since the market reopened last year – and as such appealed to bank balance sheets looking to add to their hold to maturity liquid asset portfolios,” said a spokesperson for the leads.

CIBC reopened the Australian dollar market for covered bonds in October and has since returned alongside Bank of Nova Scotia this year. Australian banks are preparing to issue covered bonds for the first time after the government announced plans for legislation in December.