National Bank of Canada priced its second euro and legislative covered bond yesterday (Tuesday), a Eu1bn seven year deal that expanded the issuer’s investor base, according to an official at the Canadian bank, on the back of what a lead syndicate banker said was “diligent and comprehensive” investor outreach.

The deal came after the issuer had at the end of February been on an investor roadshow, meeting with accounts it had not been able to engage with when it held investor meetings in the autumn before making its euro debut in December.

Leads BNP Paribas, Commerzbank, NBC and Royal Bank of Scotland announced the transaction on Monday afternoon, and yesterday built a book of more than Eu1.5bn of orders. They priced the deal at 22bp over mid-swaps, the tight end of guidance of 22bp-24bp over, which followed initial price thoughts of the mid-20s over. A syndicate banker on the deal said it was increased from Eu750m to Eu1bn.

Eric Girard, senior vice president, corporate treasury at NBC, said that the issuer is pleased with the outcome of the transaction.

“After our successful inaugural deal in December, we engaged in a second round of investor meetings in February,” he said. “Given the positive feedback from the meetings, we chose to proceed with a seven year transaction in an effort to build out our curve.

“This transaction attracted a book of 95 accounts and was made up of a mix of new investors as well as names who participated in our first deal. We were very pleased to expand our investor base and continue to develop our relationships with key European investors.”

The issuer is understood to have been targeting the middle of March for the second euro deal.

Sixty-three accounts participated in NBC’s December deal, a Eu1bn five year that was priced at 12bp over on the back of Eu1.25bn of orders.

Sarah Kanes, managing director, RBS, said that NBC has been diligent and comprehensive in its investor outreach and wanted to leverage this with another euro deal.

“They’ve been very committed to making sure investors understand the credit and the legislation,” she said.

Some syndicate bankers away from the leads had said the issuer offered an attractive spread on its latest deal compared with secondary market levels for other Canadian issuance, but Kanes said that “pricing was pretty reasonable versus secondaries”, putting the new issue premium at around 2bp.

She noted that there has been a considerable move in underlying yields since NBC priced its inaugural euro issue in December and said that this needs to be taken into account.

“The move in underlying yields has been significant in the context of the spread,” she said. “Given that, spreads have held in well.”

Another syndicate banker at one of the leads said that euro swap yields rallied 20bp since December.

Whether or not Canadian covered bonds will count towards meeting Liquidity Coverage Ratio (LCR) requirements under CRD IV is said to be somewhat of a topic of debate around issuance from the non-EEA country, and bankers involved in NBC’s deal confirmed that this is the case, but said that it depends on the nature of the investor and is not meaningful for all or even most bank investors.

Analysts have noted that the European Banking Authority has recommended to the European Commission that the LCR treatment of non-EEA assets corresponds to that of the local regulation, with legislative covered bonds LCR eligible (as Level 2A assets) in Canada, according to draft guidelines from Canadian regulator the Office of the Superintendent of Financial Institutions (OSFI).

“Given that numerous non-EEA covered bonds trade with a pick-up in the euro benchmark market, LCR eligibility of legal framework based non-EEA covered bonds for European banks would provide support for spreads,” said one analyst.

OSFI consulted on the draft guidelines for liquidity and funding requirements until late January, and is planning to publish final guidelines later this year and effective from the beginning of 2015.

Germany took 53% of NBC’s issue, the UK and Ireland 17%, the Benelux and France 15%, Asia 8%, other Europe 5%, the Nordics 2%, and the rest of the world 0.2%, according to one of the leads. Banks and private banks were allocated 39%, funds 35%, insurance companies and pension funds 11%, central banks, agencies and supranationals 11%, and corporates 4%.