Australia & New Zealand Banking Group issued the first Australian covered bond in Swiss francs yesterday (Monday), a Sfr725m (Eu600m) two tranche deal that an official at one of the leads said was the largest covered bond in the currency in recent years.

The transaction was split into Sfr325m seven year fixed and Sfr400m three year floating rate tranches, led by UBS and Credit Suisse.

“The transaction marks the largest covered bond at launch in the Swiss international segment in recent years,” said a banker at Credit Suisse, “and is testimony to the strong standing of ANZ amongst the Swiss investor base as well as the diversification appeal in the Swiss franc covered bond universe.”

The deal follows a dollar benchmark by ANZ in November, which was the first Australian covered bond, and a euro benchmark last week.

“Having successfully launched transactions in the US dollar and euro markets, ANZ was keen to be the first Australian covered bond issuer in Swiss francs, and to take advantage of the start of the year liquidity in this market,” said the banker. “In order to maximise size potential and develop a credit curve the lead managers recommended a dual tranche structure consisting of a three year FRN and a seven year fixed rate tranche, both targeting fully separate investor clusters.”

According to Credit Suisse, the FRN was aimed mainly at treasuries and money market funds, with the seven year fixed rate targeted at institutional accounts, private banks and asset managers.

Credit Suisse and UBS went out with guidance of three month Swiss franc Libor plus the mid-60s for the FRN. Guidance of the mid-70s over mid-swaps for the seven year was designed to offer a yield over 1.5%, which the Credit Suisse banker said was an important threshold for several institutional accounts.

After a soft-sounding, the books were opened yesterday afternoon with a minimum size of Sfr500m being targeted. The level of demand enabled the final sizes of Sfr400m for the three year and Sfr325m for the seven year.