ANZ NZ and Kommunalkredit Austria followed up on recent roadshows with twice subscribed Eu500m five year benchmark covered bonds today (Tuesday), with one banker saying he was surprised more FIG issuers were not taking advantage of favourable conditions.

The only other FIG deal in the euro market this morning was a Eu1.25bn long five year fixed rate senior unsecured transaction for Italy’s UniCredit, which a syndicate banker away from the leads said was more of an opportunistic trade than the other deals out today.

He said that he was surprised that the primary market is not more active, and that the strength of the market yesterday (Monday) seemed to have caught some issuers unawares.

“There are plenty of reasons to take advantage of the window this week,” he said, noting potentially disruptive upcoming events such as German parliamentary elections and the end of the financial quarter.

Equities and indices reacted positively yesterday to the withdrawal of Larry Summers from the candidacy for the chairmanship of the Federal Reserve given the view that he would have pushed for a hastier tapering of the central bank’s asset purchases. The iTraxx Senior Financials index tightened by some 7bp, for example, and although indices are said to have retraced some of yesterday’s moves cash markets are today steady after having failed to replicate the tightening in indices.

Today’s benchmark covered bonds for ANZ New Zealand (Int’l) Limited and Kommunalkredit Austria come after the issuers recently went on roadshows. Both issuers have been away from the market for some time, Kommunalkredit Austria the longest.

Its last deal was in February 2011, while ANZ NZ last tapped the benchmark market in September last year, selling a Eu750m five year deal at 43bp over mid-swaps. Its new issue is the first from a New Zealand bank since then and comes as covered bond legislation is – slowly – making its way through the country’s parliament. ASB, another New Zealand issuer, has also been mentioned as a new issue candidate.

Leads ANZ, Barclays and UBS announced the mandate for ANZ NZ’s deal yesterday afternoon, and went out this morning with initial price thoughts of the high 20s for a Eu500m no-grow five year issue. This generated indications of interest of around Eu500m, according to a lead syndicate banker, with official guidance then set at the 25bp over area.

The leads will price the deal at 23bp over on the back of a final order book of Eu1bn.

Syndicate bankers away from the leads noted that the level on the deal, at least where it was initially marketed, looked generous versus secondary levels, with ANZ NZ 2017 paper around 6bp-8bp over, but that the more relevant comparable was a recent five year trade from the issuer’s Australian parent.

This was also the approach taken by the leads, with a syndicate banker on the ANZ NZ trade saying that initial price thoughts of the high 20s put the issue some 10bp back of its parent’s covered bonds. Another said that at 23bp over, the premium to the Australian paper was some 7bp.

ANZ Banking Group launched a Eu1bn five year at 17bp over on 27 August. This was today said to be at 16bp-17bp over.

A syndicate official away from the leads said that 10bp was at the tighter end of where the spread between ANZ Australian and New Zealand covered bonds has been in recent times, while another said that he had been pricing an ANZ NZ deal some 5bp-7bp wide of the Australian parent. Neither seemed to take issue with the pricing.

Kommunalkredit Austria attracted more than Eu1bn of demand for a Eu500m five year no-grow public sector backed Fundierte Bankschuldverschreibung, which is expected to be rated Aa2 by Moody’s.

Leads BNP Paribas, Deutsche Bank, DZ Bank, Erste Bank and LBBW will price the deal at 30bp over mid-swaps, the tight end of guidance of the 33bp over area. This was set when books were officially opened after initial price thoughts of the mid-30s generated indications of interest in excess of Eu800m, according to a lead syndicate official.

A syndicate banker away from the leads put fair value at around 20bp over, saying that the mid-30s looked generous compared with that but that the issuer had adopted a sensible pricing strategy. The new issue premium amounted to around 10bp, he said, although the leads will probably put it in the high single-digits. Overall, the level was fair for a Aa2 rated issue and an order book of Eu1bn was a good result, he added.

Photo: Kommunalkredit Austria