‘Generous’ price but ‘kudos’ to Nationwide pre-ECB jumbo
Nationwide Building Society is pricing a Eu1.5bn five year covered bond, the biggest euro benchmark since August, after nipping into a market bolstered in part by talk of Europe-wide bank recapitalisations but ahead of possible news of a new ECB purchase programme this (Thursday) afternoon.
Barclays Capital, HSBC, Société Générale and Royal Bank of Scotland are understood to have built an order book of Eu2.3bn, which would be the largest for a euro benchmark covered bond since fellow UK issuer RBS on 31 August sold a Eu2bn three year issue on the back of Eu3.5bn of orders.
The order books were open for around one hour, according to a syndicate official away from the leads.
The Regulated Covered Bond issue will be priced at 130bp over mid-swaps, which follows guidance of the 135bp over area. Syndicate officials away from the leads put the new issue premium at between 15bp and 20bp, with two seeing it at 20bp on the bid side.
Some suggested the deal had come cheap, with one saying that a re-offer spread of 125bp over was “definitely on the cards” and that the issuer had been overgenerous in showing the 135bp over area to investors as a starting point. UK covered bonds, in particular Nationwide’s, have been in demand, he said.
But he was complimentary about the deal, saying that Nationwide had negotiated challenging markets and had shown courage by moving into the market.
“Kudos to them,” he said. “I’m glad it went well, and this is what the market needed.”
Another syndicate official said that the issuer was taking advantage of an “underlying tone of bullishness”.
Another syndicate official said he was surprised by the deal, but that it had gone very well.
“It’s a good name, not impacted by the current crises, has a safe business model and is not a very frequent issuer,” said the syndicate official.
Market sentiment was better today, he said, citing an announcement by European Commission president José Manuel Barroso this morning on a coordinated plan to recapitalise banks.
Comments from other European policy makers about bank recapitalisations and talk about the International Monetary Fund considering buying peripheral government bonds were driving sentiment, said another syndicate official, adding that they indicated that politicians were at last “singing from the same hymn sheet”.
Syndicate bankers had been playing down the likelihood of benchmark euro supply this week given grim market conditions and market participants’ passiveness ahead of a possible announcement of a new covered bond purchase programme by the European Central Bank this (Thursday) afternoon.
Some noted that if the ECB does announce such a plan UK covered bonds do not stand to benefit directly as any purchase programme would focus on euro-zone issuance.
Syndicate bankers also mentioned an approaching blackout period as perhaps being relevant to the timing of today’s transaction. Nationwide announces interim results on 22 November.
Austria’s Hypo Niederösterreich (HYPO NOE Landesbank) has mandated Deutsche Bank, DZ Bank, Erste Bank, RBI and UniCredit to update investors ahead of a euro public sector backed Pfandbrief targeted for the coming weeks.
Note: There were a flurry of reports this week about ASB Bank of New Zealand having published a prospectus for a covered bond programme. For those of you that missed it, our coverage was in this story on 9 September:
