KBC made further inroads into its target of raising Eu3bn via benchmark covered bonds this year when it sold a Eu1bn seven year issue yesterday (Tuesday), according to an official at the issuer, who said the deal was launched to capture good demand for the asset class.

The transaction was KBC’s second benchmark covered bond this year, after a Eu750m 10 year sold at the end of January.

“Our aim is to do Eu3bn in covered bond funding in 2013, so that leaves us with Eu1.25bn to do over the rest of the year,” the KBC banker told The CBR.

“Yesterday’s deal was fantastic.”

Leads DZ Bank, KBC, LBBW and RBS gathered Eu2.1bn of orders from 138 investors, which the banker said is an “excellent” number of accounts.

“That’s more investors than in our 10 year, but less than for our inaugural, but that is normal,” he said. “There is great demand for covered bonds so that is why we took advantage of the window.”

The new issue was priced at 16bp over mid-swaps, the tight end of guidance. This had been set at the 18bp over area after initial price thoughts of the 20bp over area. According to the KBC banker this amounted to pricing flat to KBC’s curve.

A syndicate banker away from the leads said that the deal priced a couple of basis points through the Belgian government bond curve, “yet again an example of how far the asset class has come”.

A covered bond analyst said that the demand for the transaction underscores ongoing strong demand for Belgian covered bonds despite their modest performance in secondary markets, as compared, for example, with recent French issuance.

German investors took 49%, Nordics 15%, the Benelux 12%, France 6%, the UK 6%, southern Europe 4%, Switzerland 3%, Asia 3%, and others 2%. Banks were allocated 66%, asset managers 26%, insurance companies and pension funds 5%, and others 3%.