ANZ National is adding Eu250m to a Eu500m five year covered bond initially sold in October for what is only the second bout of New Zealand benchmark euro issuance this year, after meeting with over Eu1bn of demand in a market lacking supply.

The issuer is working with the same banks that lead managed the initial deal, a Eu500m five year re-offered at 95bp over on 13 October that was ANZ National’s debut covered bond. Leads ANZ, Barclays Capital, BNP Paribas and UBS today (Tuesday) built an order book of around Eu1.3bn to price the tap at 85bp over, inside initial guidance of the 95bp over area.

A syndicate official at one of the leads said that the underlying bond was in the low 90s in the secondary market, and that the level of demand justified tightening the pricing on the increase. The transaction went well given the small size of the initial issue, the “low beta” character of New Zealand covered bonds, and good market conditions, he added.

A syndicate banker away from the leads said the tap was coming roughly flat to where fair value would be, and that some reverse enquiries and short positions at the leads probably helped the transaction.

“I’m not surprised it’s gone well and gone quickly,” he said.

Another syndicate banker away from the deal also drew attention to the high amount of demand in the market.

“We’re inundated with clients looking for paper,” he said. “Reverse enquiries are coming in from all over the place.”

He said that there has been a role reversal in 2012, with funding teams “holding the cards” rather than buyers.

Supply and demand dynamics over the next couple of weeks are expected to be strongly informed by take-up of three year funding available via the ECB’s second longer term repo operation (LTRO) tomorrow (Wednesday), with one syndicate banker saying that this and private sector involvement (PSI) in writedowns of Greek government debt are key developments being watched by market participants.

“The market is just treading water,” he said.

Another said that the broader market backdrop was fairly decent, with corporates, for example, able to churn out deals, including “home-runs”. He said he had a couple of new issue projects up his sleeve that were ‘do-able’ but that a desire to do a larger deal size was influencing their timing.

“Things are looking OK,” he said. “My guess is that the core issuers have no particular desire to hit the markets anytime soon, so the question is the periphery.”

He downplayed Italian issuers’ interest in launching deals, citing either low collateral availability or lack of a need to come to market, with the country’s national champions perhaps contemplating deals mainly for marketing purposes, and said that lower tier two Spanish issuers need a stronger market to proceed with issuance, with tomorrow’s LTRO results an important factor.