Westpac priced a Eu1bn seven year deal inside guidance and inside its curve yesterday (Thursday) on the back of strong demand and improved investor perception of low risk names in the euro market, according to a lead syndicate banker.

Leads Barclays, BNP Paribas, UBS and Westpac printed the issue at 19bp over mid-swaps, through guidance of 20bp-22bp over, and well inside initial price thoughts in the low to mid-20s.

“Looking at a Westpac 2019 issue and a Commonweal Bank of Australia 2022 issue we were targeting a 20bp-21bp print, which would have meant practically no issue premium,” said a syndicate banker at one of the leads.

“However, the strong demand, granularity and geographical distribution of the order book allowed us to tighten the spread even further than that,” he said.

The lead syndicate banker said that few accounts were lost in the process.

“I calculated we must have lost only some Eu15m-Eu20m of orders,” he said.

The deal attracted Eu2bn of demand, and tightened 3bp in the aftermarket, he added.

He said notable was the share taken by central banks, especially from Asia. Central Banks were allocated 20%, fund managers 35%, banks 34%, insurance companies 6%, and others 5%.

German and Austrian investors took 23%, Nordics 19%, Asia 13%, Switzerland 10%, France 10%, the Benelux 10%, the UK 8%, and others 7%.

The deal was the first Australian covered bond issue in euros since the beginning of the year. The lead syndicate banker said that Westpac seized the opportunity in the euro market, after having for some weeks discussed with leads when an issuance window might open, said the lead syndicate banker.

“Recently it has been a challenging time in the euro market, especially after Stadshypotek’s deal, which changed the perception of the low beta names, especially at tight spread levels,” he said.

Stadshypotek launched a Eu1bn long five year deal on 12 March that was priced at 14bp over mid-swaps after guidance was widened 5bp from IPTs.

“But the market now looks much better,” said the syndicate banker. “There has been a readjustment in relative values, particularly versus the government bond market and SSA market.”