Bank of Ireland Mortgage Bank placed a five times oversubscribed Eu500m five year deal on Friday, allowing the issuer to start rebuilding a covered bond curve with the longest dated Irish transaction since 2010, the bank’s head of wholesale funding told The Covered Bond Report.

Darach O'Leary, Bank of Ireland

Leads Deutsche Bank, Morgan Stanley, Natixis and RBS tightened the deal’s spread by 20bp during execution, pricing the new issue at 190bp over mid-swaps after having gone out with initial price thoughts of 200bp-210bp, and guidance of the 195bp area.

Darach O’Leary, head of wholesale funding at Bank of Ireland, told The CBR that the deal was another positive step for the issuer after it launched a Eu1bn three year transaction that reopened the Irish covered bond market in November.

He noted that the November three year deal was priced at 270bp over mid-swaps, so achieving better levels with a longer dated transaction was a very positive result for Bank of Ireland (BoI).

O’Leary said that at 190bp over mid-swaps the new issue came some 25bp wide of BoI’s curve. The issue tightened some 5bp in the secondary market on Friday afternoon, he added.

The five year maturity was targeted to allow BoI to start rebuilding a covered bond curve.

“Extending our covered bond curve was the logical next step for Bank of Ireland,” said O’Leary. “This new five year transaction affords the investment community the first opportunity to buy five year Irish covered bonds in the primary markets in over three years and, following the Eu1bn three year transaction we executed in November, illustrates the growing demand from investors to extend duration in Bank of Ireland covered bonds.”

The smaller size of the deal, Eu500m instead that Eu1bn, reflected the limited funding need of the bank for 2013, he added.

Syndicate bankers away from the leads suggested that the extremely positive outcome of a 10 year Irish government bond auction last Wednesday, the first since the country’s 2010 bail-out, had prompted BoI’s covered bond deal on Friday.

However, O’Leary said that although the success of the sovereign bond supported BoI’s transaction, it was not its main driver.

“We had been actively monitoring the market over recent weeks” he said. “Following our preliminary results on March 4, we made the decision to launch a new covered bond deal on Friday given the strong market backdrop.

“This week’s successful Irish sovereign deal and our five year covered bond transaction highlight the market’s increasing demand for Irish assets.”

O’Leary said that BoI’s deal attracted Eu2.5bn of orders from more than 180 accounts.

German investors took 32%, the UK 21%, Asia 10%, Nordics 9%, southern Europe 9%, Switzerland 6%, France 5%, the Benelux 3%, the US 3%, Ireland 1%, and others 1%.

Asset managers were allocated 52%, banks 13%, insurance companies 10%, hedge funds 10%, central banks and agencies 7%, private banks and retail 4%, and others 4%.