ANZ National sold a Eu500m five year, debut covered bond yesterday (Thursday), which achieved a solid result taking into account the obstacles faced by an issuer arriving in the euro market from the other side of the world, according to a syndicate official at one of its leads.

ANZ, Barclays Capital, BNP Paribas and UBS priced the mortgage backed deal for ANZ National (Int’l) Limited at 95bp over mid-swaps, the middle of guidance of the 95bp over mid-swaps area.

“It went in line with expectations, taking into consideration that the New Zealand covered bond market is a bit of a different animal than the European,” said Armin Peter, head of covered bond business and syndicate at UBS. “If you look at some of the recent deals, you have 50% of CRH going into France, 45% of Sampo into Scandinavia – the New Zealanders don’t have a domestic bid.

“That being said, the expectations aren’t for a Eu1bn deal, either, and the issuer was only looking for Eu500m. We had a book of Eu700m, equivalent to 40% oversubscription, which is higher than for other deals this week.”

Some 50 accounts participated in the transaction, lower than on some recent benchmarks, reflecting the lack of a domestic bid and also lower bank demand due partly to lack of ECB repo eligibility, according to Peter. However, with banks being allocated only 15%, this meant that 85% went to real money accounts, with asset managers taking 41%, insurance companies 25% and central banks 17%.

Germany was allocated 32.5%, Asia 22%, the UK 17%, the Benelux 9.5%, CEE 7%, the US 4%, France 3%, Italy 2%, Switzerland 1.5%, and others 1.5%. Peter said that the low French participation, compared with a deal like Westpac NZ, reflected how low absolute yield levels had dampened demand from some accounts – particularly when senior unsecured supply, such as a deal for Standard Chartered, was offering returns closer to 4%.

With Westpac NZ’s five year issue trading at around 80bp on the bid side, Peter said that ANZ’s issue incorporated a new issue premium of about 15bp, towards the middle of the range of premiums paid on recent supply, with some having paid around 10bp and others 20bp. He said that the new issue was 7bp tighter this morning.