ING Bank yesterday (Tuesday) sold the longest dated benchmark dollar covered bond since the onset of the crisis, a $1.5bn 10 year deal that met the issuer’s objective of diversifying its investor base and easing pressure on its euro curve, according to an official at the bank.

The deal comes after Sweden’s Stadshypotek sold a $1.5bn seven year issue in September that was at that time the longest dated Yankee covered bond since the crisis. Depfa ACS Bank issued the longest ever benchmark dollar covered bond, a $1.25bn 30 year deal targeted at US accounts in March 2007.

“This ING transaction is a milestone for the US dollar covered bond market as it represents a further building out of the US dollar covered bond curve,” said a lead syndicate official.

Leads Barclays, Deutsche Bank, ING and RBC built an order book of around $2.2bn (Eu1.71bn) and priced the 144A deal at 98bp over mid-swaps, following guidance of 100bp plus or minus 2bp. A syndicate official on the deal said that the size and quality of the order book provided the leads with pricing leverage, allowing pricing at the tight end of guidance.

The transaction is ING’s second US targeted covered bond, coming on top of a $1bn long five year issued via a sole lead in November 2010.

Martin Nijboer, head of long term funding at ING Bank, said the new issue was launched in response to reverse enquiries dating back to October on which the issuer was unable to act before heading into a close period in the middle of October due to legal documentation that needed to be put in place.

“We didn’t manage to do it before the close period, but as soon as we came out of it our legal documentation homework was done,” he said, “and we were in a position to issue.”

The reverse enquiries were for 10 year paper, a maturity that in the US dollar market represented “unchartered territory”, said Nijboer.

“You don’t know how it will go, but the response was very good,” he said. “We are very satisfied.”

The deal was not in the issuer’s funding schedule for this year, according to Nijboer, and constitutes pre-funding by replacing a transaction that would otherwise perhaps have been carried out early next year.

“I didn’t plan to do this transaction,” he said, “but one of the lessons of the crisis is that when there is a window you take it, and to do this at an attractive spread was an easy decision.”

With around 73 accounts participating in the deal, including names new to ING, the transaction fulfilled the issuer’s main objective of diversifying its investor base, he said.

“The majority of the names are ones that you won’t see in a euro covered bond, and some are also ones we hadn’t seen in our senior unsecured issuance,” he said.

A syndicate official away from the leads said that ING’s dollar deal looked cheap, coming at the equivalent of around 16bp wider than where it would re-offer a 10 year euro benchmark. He said that it “amazed” him that issuers were having to pay up in the US market despite a lack of supply, partly as a result of Canadian issuers being absent from the market, and noted that fees are also more expensive in the US market.

He said that an ING 2022 euro benchmark was in the high 30s, and that a new 10 year would come in the low 40s, with the re-offer spread of 98bp over on yesterday’s dollar issue equivalent to around 59bp over in euros.

ING’s Nijboer acknowledged that the issuer had paid a premium versus euros, albeit by less than the syndicate official had suggested, and said that it was in line with what other issuers pay and normal for a diversification exercise.

“We would do a new euro 10 year in the high 40s or low 50s over,” he said, “and the dollar issue swapped back is equivalent to around 59bp over euro mid-swaps, so that’s a 5bp-10bp premium, which is fair.”

ING has dollar funding needs, and therefore is not swapping the proceeds, he added, with the 144A transaction also beneficial in terms of taking pressure off the issuer’s euro curve.

“Over the past five years we have been one of the biggest issuers in covered bonds, raising around Eu30bn,” he said. “You have to diversify to take pressure off your home market, especially if you usually want size.”

US accounts took 68%, Asia 23%, and Europe 9%. Asset managers were allocated 63%, official institutions 24%, insurance companies 5%, pension funds 4%, banks 2%, and hedge funds 2%.