Westpac launched the first Australian euro benchmark covered bond of the year this (Thursday) morning, a Eu1bn seven year deal, while BayernLB is out with a Eu500m public sector Pfandbrief as this week’s benchmark supply looks set to match that priced in the entire month of March.

Today’s deals bring the tally of new euro issues launched this week to five, in addition to a HSH Nordbank tap on Monday, with supply including the increase amounting to Eu4.75bn. This matches total euro benchmark covered bond supply, including taps, in March, in a reflection of risk-on sentiment said to be in part triggered by the announcement of further quantitative easing by the Bank of Japan and the possibility of other central banks following suit.

Leads Barclays, BNP Paribas, UBS, and Westpac set initial price thoughts in the low to mid 20s over mid-swaps on Westpac Banking Corporation’s deal. As indications of interest approached Eu1.5bn, books were opened with guidance set at 20bp-22bp over mid-swaps, said a syndicate banker away from the leads.

“The deal is looking interesting,” he said. “Despite being a high quality issuer they are offering a bit of spread, an attractive level for investors.”

He said that the deal was proceeding very quickly from the outset.

More than Eu2bn of orders are said to have been placed for the deal, and the re-offer spread fixed at 19bp over.

A syndicate banker away from the leads said that this was a tight spread, but accepted by investors, who are cash rich, with Westpac’s deal also offering rarity value.

Another syndicate banker away from the leads said that he would have expected the deal to come even tighter given the lack of supply of the past weeks, but that the transaction was overall positive and guidance of 20bp-22bp over did not incorporate much of a new issue premium, if at all.

Analysts at ING said that a Westpac Eu1bn July 2019 was bid at z+19bp, following a 4bp tightening since last Thursday. They said at the beginning of the transaction that they would expect the new issue to be priced at the tight end of guidance because of the high amount of liquidity available with investors and the positive performance of a BNP Paribas Home Loan Eu1bn seven year deal yesterday, which was priced 1bp through secondaries.

Westpac’s deal is the first euro issue launched by an Australian bank this year. Commonwealth Bank of Australia and National Australia Bank came to market in January and February with two well received US dollar transactions, while ANZ placed a £500 floating rate note covered bond in February.

The deal was Westpac’s third euro benchmark after the Australian issuer launched a Eu1bn five year issue in July last year and an inaugural Eu1.75bn four year trade in February 2012.

According to a syndicate banker away from the leads, the euro deal may have been prompted by Westpac wanting to maintain its presence in the euro market, and that the dollar market still offers “best pricing” opportunities.

BayernLB also tapped the covered bond market today, going out with a Eu500m 10 year public sector Pfandbrief after announcing a mandate yesterday afternoon.

Leads BayernLB, Crédit Agricole, ING, Natixis, and UniCredit set initial price thoughts in the low to mid teens area, guidance at the 12bp over mid-swaps area and then fixed the re-offer spread at 11bp over.

The order books were closed at 11.15GMT in excess of Eu700m, said a banker at one of the leads.

According to a syndicate banker away from the leads the guidance of the 12bp over area offered a new issue premium of some 4bp.

“Still, it’s a tight level for a 10 year, not very beefy,” he said.

Another syndicate official away from the leads said the deal was priced correctly and that the level of demand was the appropriate magnitude for a Pfandbrief deal at the moment.

BayernLB’s last public sector benchmark covered bond was a Eu500m 10 year Pfandbrief launched in July, which was the first sub-Eu1bn benchmark launched by the German issuer, and was priced at 17bp over mid-swaps.

According to a syndicate banker away from the leads the two deals were “not harming each other”, with BayernLB attracting primarily domestic investors and Westpac gathering international demand.

The two deals arrived in a week of surging primary market activity after almost a month without supply, with one syndicate banker attributing the pick-up in activity to the announcement of further quantitative easing by the Bank of Japan of Monday, and the feeling that other central banks could follow suit.