BNZ this (Monday) morning met with decisive demand for a long three year euro benchmark covered bond after going out with a level close to where it tested appetite for a five year issue earlier this month. Sparebanken Vest is set to take IoIs this afternoon.

The May 2015 deal for the New Zealand bank is the first Eu500m-plus euro covered bond this year with a 2015 maturity.

Leads DZ Bank, JP Morgan, NAB, Natixis, RBS and UniCredit built an order book of around Eu1.5bn. They are pricing a Eu500m transaction at 113bp over mid-swaps, after having tightened guidance to 115bp-120bp over mid-swaps from initial guidance of the 125bp over area.

This compares with initial pricing thoughts of 125bp-130bp for a five year issue that BNZ tested on 16 January but did not pursue. Bankers close to the deal said at the time that muted interest for supply from the region, after heavy issuance by Australian banks in a short period of time, was mainly to blame rather than resistance specific to the pricing or to the issuer.

A syndicate official away from the leads said that BNZ chose a defensive transaction for its second approach to the market, and that this was the right decision.

“They went for the maturity that investors wanted,” he said, adding that the trade was attractive given the level and a lack of available paper in the secondary market.

Other syndicate officials away from the leads also said the level was attractive, with one referring to the trade as a “must-have” in relative value terms. He noted that New Zealand does not yet have covered bond legislation, but that the ratings and credit quality on offer are strong. The Reserve Bank of New Zealand is consulting on a legislative framework for covered bonds.

The syndicate official added that the transaction is generously priced, in particular in comparison with outstanding Australian and New Zealand issues. A Eu1.5bn five year deal for Commonwealth Bank of Australia from 4 January is trading at around 78bp mid, he said.

He said that the large order book for the deal, in spite of it being UCITS ineligible and CBPP2 ineligible showed strong demand for covered bonds in general.

Another syndicate banker away from BNZ’s deal said the level was “more than fair”.

“It’s cheap as chips”, he said. “I can’t believe they didn’t get the five year done before. If they don’t get this deal done then it doesn’t make sense for them to issue in euros because they are already paying a huge premium.”

BNZ is a subsidiary of National Australia Bank.

Sparebanken Vest Boligkreditt finished a roadshow on Friday and is aiming to start collecting indications of interest this afternoon for what is expected to be a five year trade. Commerzbank, DZ Bank, ING, and Nordea are working with the Norwegian issuer.

A syndicate official at one of the leads said that feedback from the roadshow was overall very positive, and that the intention is go live with a transaction tomorrow (Tuesday) after collecting IoIs later today.

A syndicate banker away from the leads put a 2016 issue for Sparebanken Vest at around 65bp over bid. He said that the mid 70s would be a generous starting point, but that he would not be surprised if the issuer priced a deal at 70bp given a strong bid for Nordic paper and a supportive market.

Fellow Norwegian issuer SpareBank 1 Boligkreditt priced a Eu1.25bn seven year issue at 77bp over last Tuesday, and Terra BoligKreditt sold a Eu500m five year at 73bp over on 18 January.

Australia’s Westpac is understood to be starting a euro roadshow today.