ASB Finance Limited made an aggressively priced debut relative to secondary market levels for outstanding New Zealand euro benchmarks yesterday (Tuesday), with a syndicate banker on the deal saying that demand totalling Eu850m confirmed the leads’ approach to pricing.

The deal, a Eu500m no-grow, was priced at 68bp over mid-swaps, the tight end of guidance of the 70bp over area, via leads Barclays, CBA, and UBS.

Syndicate bankers away from the leads noted an attractive pick-up over where Commonwealth Bank of Australia, ASB Bank’s parent, trades, but said that pricing was aggressive compared with levels on euro benchmarks issued by ASB’s New Zealand peers.

One said that ASB’s deal came 15bp through secondary market levels for Bank of New Zealand January 2017s, which were around 83bp over.

“It looked good, and sounded like a granular book,” he said.

Another syndicate banker also noted that pricing was tight compared with New Zealand outstandings, putting Westpac NZ and ANZ National 2016s at 65bp over bid.

Armin Peter, head of covered bond business and syndicate at UBS, said that a tightly priced debut for ASB readjusted the pricing relationship between Australian and New Zealand covered bonds.

Going into the transaction the leads felt that New Zealand euro benchmarks traded with too large a pick-up over Australian deals in the secondary market, said Peter.

“The pricing on ASB’s deal means that we can talk of a spread of 30bp over the bid side of the Australian market,” he said, “with 30bp the tightest we could achieve and far better than what was done earlier in the year when the spread difference was more in the region of 40bp.”

He said that investors like to use BNZ’s curve as a pricing reference and that some therefore felt that ASB’s debut was priced too aggressively in coming inside BNZ levels, but that the leads and the issuer used more tightly trading ANZ and Westpac NZ outstanding 2016s as a reference.

“The 30bp spread over Australian comparables should be enough but yesterday morning it was not necessarily considered that way by accounts based on secondary levels,” said Peter.

A total orderbook of Eu850m for the Eu500m no-grow transaction vindicated the approach of pushing on pricing, he added.

“We went out with IPTs of the 70bp over area, then guidance of the 70bp over area, and then priced 2bp inside that, which is the ideal outcome for an issuer,” he said. “ASB struck a good balance between pricing ambitions and size targets in an uncertain market environment.”

Germany and Austria took 41% of the bonds, France 23%, the UK 13%, Switzerland 7%, the Benelux 5%, and others 11%. Fund managers were allocated 38%, insurance companies 26%, banks 25%, private banks 7%, and agencies 5%.