DNB Boligkreditt will today (Tuesday) price a Eu2bn 10 year deal after soaking up nearly Eu3bn of orders despite not offering a 3% coupon that had been seen as key to attracting long end demand. Meanwhile, Leeds Building Society added new sterling FRN supply.

The Norwegian issuer went out with initial price thoughts of the low 60s over mid-swaps this morning, with leads BNP Paribas, HSBC, NordLB and UniCredit taking indications of interest on this basis. They quickly moved to officially open order books, with guidance unchanged from the initial pricing thoughts, and gathered around Eu2.9bn of orders (pre-reconciliation). The spread has been fixed at 61bp over mid-swaps.

That represents tighter pricing than where DNB in January re-offered a Eu2bn five year deal, at 68bp over. That was yesterday (Monday) said to be at around 38bp over mid-market.

A syndicate official away from the leads yesterday noted that 10 years is a very yield-driven part of the curve, and that with 10 year swaps at around 2.23% and DNB June 2021s around 52bp over asset swaps, the issuer’s 10 year deal would still be “a long way” from 3%.

He suggested that the leads would struggle to lure insurance companies, but that other accounts would want to be involved in the deal.

“Elsewhere the market is bid only,” he said. “Dealers have zero inventory, and levels are one way.”

Another syndicate banker said that with underlying market conditions so good the coupon was not important.

“Who cares?” he said. “Two per cent, three per cent – it doesn’t matter.”

A lead syndicate banker said that the deal was coming with a 2.75% coupon. He acknowledged the widely held view that 3% is a key threshold for investors active in the long end of the curve, but said that the order book for DNB’s transaction showed that while such accounts would like to see such a level, in the absence of alternatives a high quality issuer from a prime jurisdiction can overcome the 3% obstacle.

“We are not very surprised, but we are very happy with this result,” he said.

He said that there was a good balance between banks on the one hand, and insurance companies and pension funds on the other – each with 44% – and that real money participation was in line with that typically seen in 10 year deals.

“The distribution isn’t anything peculiar,” he said.

A syndicate banker away from the deal said that he was not surprised that the issuer proceeded with a 10 year deal.

“It was smooth execution,” he said. “Any maturity will work for a good name, from a core jurisdiction.”

He said that initial pricing thoughts were fair, even though they incorporated what he saw as only a limited new issue premium, of 5bp-8bp – “which is nothing”. However, he said that with investors sitting on “a mountain of cash” any transaction will work as long as it is fairly priced, adding that many investors have revised yield and coupon targets.

Leeds Building Society is pricing a £250m “no-grow” three year sterling floating rate covered bond at 158bp over three month Libor on the back of an order book of around £450m. Leads BNP Paribas and RBS marketed the deal at 160bp-165bp over.

At 158bp over, Leeds’ deal is coming inside secondary levels for a £750m three year Abbey National Treasury Services floater, which provided the most relevant pricing comparison, according to a lead syndicate official.

“That’s a good result,” he said, adding that the building society has limited funding needs.

Abbey’s floater, part of a dual tranche issue launched on 8 February, was re-offered at 165bp over three month Libor and was said to be trading at 159bp/154bp.