A deal from BNZ failed to emerge this (Tuesday) morning after an IoI process yesterday afternoon, leading to suggestions that the five year euro issue has been pulled. Meanwhile, Terra is finally delivering on plans to issue a euro, while Nationwide wrapped up a sterling FRN.

The BNZ trade was set to be the first New Zealand covered bond of the year, with DZ Bank, JP Morgan, NAB, Natixis, RBS and UniCredit having been mandated as lead managers. The leads started taking indications of interest yesterday (Monday) afternoon on the basis of initial pricing thoughts of 125bp-130bp over mid-swaps, but the deal does not appear to have moved beyond this stage.

Syndicate officials at the leads said they could not comment on the status of the new issue project, but a syndicate banker away from the deal said he had heard the issuer had decided not to proceed with a transaction.

He said that this surprised him as the pricing seemed realistic, including a new issue concession of around 15bp-20bp, and that the issuer’s approach in marketing the deal as being for Eu500m minimum was also reasonable. Market conditions are supportive, he added.

He suggested that three Australian euro benchmarks in a short timeframe had affected investor interest for New Zealand covered bonds, with accounts perhaps preferring to buy Australian supply rather than a New Zealand issue, although he questioned whether there is room for a further Australian benchmark.

Euro issues for CBA and NAB that were priced at 100bp over earlier this month were trading at around re-offer, he said, while BNZ November 2017 bonds were marked at 112bp over.

Another said he had not heard anything about the bond and suggested “that probably means it got stuck somewhere”.

Terra Boligkreditt is planning to execute a euro denominated transaction tomorrow (Wednesday) after putting on hold the transaction last year after a roadshow in September. Lead managers Commerzbank, Nordea, UBS and UniCredit put the trade aside last year because of an unfavourable cross-currency basis swap.

A syndicate official at one of the leads said the cross-currency basis swap had improved “significantly” in the last couple of days, hence the revival of the project.

“We wanted to refresh on screens,” he said.

A five year maturity is expected.

Nationwide Building Society issued a £650m (Eu786m) January 2015 floating rate covered bond priced at 165bp over Libor yesterday. Leads HSBC, RBC, RBS and UBS built a book of £675m comprising 50 accounts.

“We are very pleased with the transaction,” said a syndicate official at one of the leads.

He noted that the floating rate note market is more competitive for funding than other covered bond markets.

“They are tapping into money market funds and treasuries,” he said.

Nationwide’s deal is the second large publicly marketed sterling floating rate covered bond this year, after Barclays Bank sold a self-led £750m three year floating rate covered bond at 155bp over three month Libor on Friday.

The syndicate official said the floating rate covered bonds are presently playing a larger part in the UK than in euros.

“I don’t know how many deals the market will take, but for now it has caused a bit of a stir,” he said.

Nationwide’s came about 10bp back of where the Barclays transaction was trading.

“We just looked at where Barclays traded in various markets, and 10bp back is a good spread for the issuer,” said the syndicate official

The UK and Ireland took 75%, Nordics 15%, Germany 5%, and Switzerland 4%. In terms of investor type, it was split between funds and banks.

RBS analysts noted that last year there were strong supply volumes in sterling at the beginning of the year, though these slowed significantly during the course of the year.

“It seems likely that we will see another record supply of sterling covered bonds in 2012,” it said.