NAB priced a $1.25bn (Eu930m, A$1.35bn) long five year covered bond yesterday (Thursday) as part of a $2bn package, with the size of and demand for its deal smaller than a similar one from Westpac on Monday – but the overall US activity was seen in a positive light.

Like Westpac, National Australia Bank also sold three year floating rate senior unsecured paper alongside its covered bond, but here, too, it took out a lesser amount, $750m versus Westpac’s $1.75bn.

Westpac sold its $1.5bn straight five year covered bond on Monday at 46bp over mid-swaps, while NAB priced its slightly longer February 2019 deal yesterday at 47bp over mid-swaps (equivalent to 66.05bp over US Treasuries) after guidance of the 47bp area that followed initial price thoughts of the high 40s, via leads Barclays, Bank of America Merrill Lynch, JP Morgan and NAB.

NAB’s covered bond is understood to have been only marginally oversubscribed, with a book of $1.3bn, and a syndicate banker away from the leads said that, having met with a stronger reception, Westpac appeared to have benefited from first mover advantage. He said that the 47bp over spread on NAB relative to Westpac’s 46bp over looked justified given the slightly longer maturity.

Another banker away from the leads said that taken together the two deals were positive for the US dollar covered bond market, coming after only three other benchmarks in the second half of 2013.

“You see a pick-up in secondary activity, you see curves getting a bit more remarked as a result of having the new issues coming along,” he said, “and it’s clearly still a market that has an appetite for low beta bonds and decent liquidity for them as well.”

He contrasted this with the situation in euros, where low beta issuance from European banks in senior unsecured and covered bond formats has this week struggled to capture investors’ attention amid higher yielding supply from corporates and peripheral financial institutions.

“So those two transactions will serve as a signal to European issuers that the market is potentially there in dollars,” he added.

However, he suggested that, longer term, there could be impediments to dollar issuance.

“Why are people rushing to print dollars at this point in time?” he said. “One is you’ve got Thanksgiving next week and then we are into December. And the other is that the landscape doesn’t look as rosy for the dollar market into next year when you are going to have the whole US shutdown situation again in January and February.

“If you’re starting the year with a big funding programme once again and need to get a sizeable chunk of that done in the dollar market, you may therefore have a long time to wait, so I’m not surprised you’ve not seen the Australians more minded to issue right now.”