National Bank of Canada is making a much anticipated euro and legislative covered bond debut today (Tuesday) with a modestly oversubscribed Eu1bn five year deal that a lead syndicate official said was a pleasing result given the late-year timing and very tight spreads.

A deal from the Canadian issuer had been on the market’s radar for some time, after it announced a mandate in early November and then went on a roadshow. Marketing was interrupted by a blackout period ahead of NBC’s fourth quarter results, which were announced on Wednesday, and the issuer carried out further investor work before yesterday (Monday) deciding to go ahead and launch a deal.

Today’s transaction is NBC’s first covered bond in euros and its first issuance under Canada’s new covered bond legislation. It is the third bank to issue legislative Canadian covered bonds, after CIBC and RBC, although Bank of Nova Scotia also has a programme registered with the Canada Mortgage & Housing Corporation (CMHC), which administers the legal regime.

Leads BNP Paribas, Commerzbank, NBC and RBS went out with initial price thoughts (IPTs) of the low to mid-teens for NBC’s deal before setting guidance at the 13bp over area. Around Eu1.25bn of orders were placed, and the leads will price a Eu1bn deal at 12bp over.

Syndicate officials away from the transaction suggested it was a solid, if unspectacular deal, noting that the market has been slowing down since last week and that real money accounts had already been showing reluctance to invest at the tight levels characterising low beta supply.

A lead syndicate official said that NBC had been targeting a Eu750m-Eu1bn deal and that today’s transaction was “all-in-all a pleasing result” given the circumstances, namely a somewhat “ambitious” timing, with new issues not typically launched this late in the year, as well as tight spreads, Canadian covered bonds not expected to be eligible as top level Liquidity Coverage Ratio (LCR) assets, and NBC being an unfamiliar credit in euro covered bonds. (LCR comment amended.)

“We’re pleased to get the deal done,” he said.

Some syndicate officials had suggested that pricing of 12bp over was a bit wide from a relative value perspective, at least with respect to where CIBC is trading, although this is complicated by the discrepancy between where CIBC and RBC are quoted in the secondary market. A CIBC August 2018 issue was put at both 2.5bp through and flat by syndicate bankers away from the NBC leads, while a RBC October 2018 was seen at around 7bp over.

One syndicate banker away from the leads said he was expecting tighter pricing, but acknowledged that the late timing NBC’s deal may explain things, while another said the pricing looked cheap versus CIBC, but fair versus RBC. NBC’s deal will probably be the last new euro benchmark covered bond of the year, he added.

The lead syndicate official said that CIBC’s issuance has been trading well, and that a new five year RBC deal would probably come around 10bp-11bp, with NBC’s issue only a bit back of that level.