Kiwibank launched its debut covered bond transaction today (Monday), a Sfr150m long seven year issue that allowed the New Zealand bank to benefit from the flexibility of the Swiss franc market and gave investors name diversification, according to lead syndicate bankers.

Leads Barclays and UBS announced the transaction as a minimum Sfr100m, maximum Sfr150m (Eu123m, NZ$190m) long seven year issue, with initial price thoughts in the 15bp over mid-swaps area.

Books were opened with guidance of the 14bp over mid-swaps area and the deal size was fixed at Sfr150m as a result of good investor demand, said a lead syndicate banker.

The issue was then printed at 13bp over mid-swaps and has already tightened in secondary market this afternoon, he said, bid at 11bp and offered at 9bp over mid-swaps.

The lead syndicate banker said that at 13bp over mid-swaps the deal offered 1bp new issue premium over comparables outstanding New Zealander issues, and 3bp over comparable outstanding Australian issues.

The transaction was Kiwibank’s first covered bond deal after the issuer set up a NZ$3bn covered bond programme last year.

“Kiwibank chose the Swiss franc market because of its flexibility, both in terms of size and maturity,” said a lead syndicate banker.

The issue met with strong domestic demand, he said.

“New Zealander and Australian deals are usually well received, but this time investors were attracted by the possibility of real name diversification, as Kiwibank is a new issuer,” he added.

Another lead syndicate banker said that investors were also attracted by the “nowadays relatively rare triple-A” rating of Kiwibank’s covered bonds.

Asset managers took 41%, insurance companies 29%, pension funds 11%, treasuries 10%, and private banks 9%.