AIB Mortgage Bank met with strong demand for a Eu500m three year covered bond today (Wednesday) to extend the reopening of the Irish market beyond a Eu1bn three year sold by Bank of Ireland two weeks ago, which has tightened some 20bp to help AIB match its re-offer spread.

Around 150 accounts participated in the transaction to place more than Eu2bn of orders in total for the mortgage Asset Covered Security, with leads Deutsche Bank, HSBC, JP Morgan and UBS due to price a Eu500m deal at 270bp over mid-swaps.

This represents the tight end of guidance of the 280bp over area, which followed initial price thoughts of the high 200s.

The re-offer spread is the same as for a Eu1bn three year Bank of Ireland Mortgage Bank issue launched just over two weeks ago, which is said to have tightened to around 250bp over. Bank of Ireland’s transaction was the first publicly placed non-government guaranteed bond from an Irish financial institution in three years, and AIB Mortgage Bank was quickly identified as a candidate to provide follow-up supply. AIB has two outstanding euro issues, a Eu1bn April 2013 and a Eu1.5bn June 2017, according to its website.

Syndicate bankers away from the leads were positive about AIB’s new issue, noting that the pricing made sense in light of where Bank of Ireland’s recent issue is trading.

One had earlier this morning said that pricing 25bp back of Bank of Ireland secondary market levels would be a good achievement, and another echoed this sentiment.

“It’s a pretty positive deal,” he said. “I think it came at the right pricing, considering that BoI is around 250bp today, so the guidance seemed reasonably attractive.

“If you look at the high 200s versus where the Irish govvies are, it seems a pretty fair transaction.”

Another syndicate banker described AIB’s deal as a “copycat exercise”, but the first syndicate official said AIB made a smart move by going with the same maturity as Bank of Ireland, and that it had not rushed into the market.

“It’s not that they jumped into the market the next day,” he said. “Bank of Ireland launched a successful three year transaction and it is trading above par, which is encouraging, so the obvious trade for AIB was to follow that three year deal.”

A five year deal would have been comparable to AIB’s outstanding transactions and would probably have pushed the pricing wider, he added.

“So using the successful Bank of Ireland transaction – the most liquid Irish covered – to me was a prudent and right thing to do,” said the syndicate official.