ABN Amro is today (Thursday) selling the joint largest euro benchmark covered bond of the year and the sixth in 10 years, a Eu1.5bn deal that went smoothly and will be priced with a 5bp-6bp new issue premium (NIP), according to a lead syndicate official.

Leads ABN Amro, BNP Paribas, Commerzbank, Deutsche Bank and Société Générale built an order book of some Eu2bn for the deal and will price it at 34bp over mid-swaps. Guidance was set at the 35bp over area, after initial price thoughts of the mid to high 30s over.

The deal is the 14th new euro benchmark covered bond this year, and the sixth featuring a 10 year maturity. ABN Amro Bank last tapped the market in late August, with a Eu1.5bn 10 year that came at 37bp over.

A lead syndicate official said that the outstanding bond was trading at 25bp-27bp over, mid, and that interpolating the curve would suggest fair value of 28bp-29bp over for a new 10 year. At 34bp over, today’s issue is coming with a 5bp-6bp new issue concession, he said, “maximum 7bp”, which is in line to at the upper end of premiums this year.

“It was a smooth deal,” he said. “We didn’t squeeze out the last basis point.

“The order book is very solid so a Eu1.5bn deal is the right way to go.”

Nearly 100 accounts are said to have participated in the deal, with good involvement from real money investors.

The syndicate official said that demand for long dated supply is still strong, but getting thinner and that a new issue premium of some 5bp is necessary.

Some syndicate officials away from the leads said the spread was defensive, with one citing ABN Amro’s September 2023 trading at around 25bp over and 2022s in the low to mid-20s over. He said that “now is not the time to price flat to secondaries”, but questioned the need for the premium.

However, another syndicate official said that although defensive, the approach was reasonable given lacklustre demand for and limited performance potential in core covered bonds at their prevailing tight levels.

“I think they did the right thing,” he said. “There’s no point starting aggressively. It’s a good deal.”

He suggested that sizing the deal at Eu1.5bn on the back of a Eu2bn order book could be seen as risky in terms of secondary market performance, but said that he hoped the bond would fare well and had heard the order book was of good quality.