Westpac launched a Eu1bn seven year issue today (Thursday), its first euro benchmark covered bond in nearly a year and the third from an Australian this year, with the deal seen wrapping up issuance for this week but at least two transactions said to be in the pipeline.

Leads Barclays, BNP Paribas, Deutsche Bank and Westpac built an order book in excess of Eu1.4bn for what is Westpac Banking Corporation’s first euro benchmark covered bond since April 2013. Initial price thoughts were 28bp-30bp over before the leads set guidance at the 28bp over area on the back of Eu1bn of indications of interest, according to a syndicate banker on the deal. The final order book stood in excess of Eu1.4bn.

The spread was fixed at 26bp over, he said, putting the new issue premium at 2bp-3bp. That compares with pricing of 19bp over for a Eu1bn seven year that Westpac sold in April 2013 in its previous visit to the euro benchmark covered bond market.

He said that Westpac opted to take advantage of receptive market conditions and chose a seven year maturity as that point on the curve provided the deepest pool of demand and fit nicely with its funding needs. The syndicate banker said that the outcome of a referendum to be held by the Crimean Assembly on Sunday (March 16) to decide whether Crimea should formally split from Ukraine could affect the market.

“Alongside the receptive market conditions, there is uncertainty as to how things will turn out following the referendum in the Ukraine,” said the syndicate official.

A syndicate banker away from Westpac’s deal said that he would also have gone with 28bp-30bp over as a starting point for the trade, seeing at most a 1bp new issue concession at 26bp over.

Westpac’s deal is the fifth euro covered bond this week to make for Eu4.25bn of supply, with three of the five deals hitting the market on Tuesday. (See here and here for reviews of LF Hypotek and CaixaBank benchmarks launched that day.)

A syndicate official away from the leads said that markets seem to be “on fire” across the board, and that despite some weakness in the market yesterday (Wednesday), trades in euros and dollars had gone very well.

Westpac’s deal is seen as likely to be the last benchmark covered bond of the week, although syndicate bankers said the market should be open for issuance next week. One said that he had mandates for two core deals. German and Nordic issuers are seen as new issuance candidates, with Allied Irish Bank also mentioned – LF Hypotek priced the first Swedish issue of the year on Tuesday after a deal from Finland’s OP Mortgage Bank, and Bank of Ireland Mortgage Bank also tapped the market this week.

“In the covered space, Australian issuers continue to receive demand from the euro investor base, even though they are not ECB eligible,” he said. “This means they have to pay up slightly more for a senior transaction compared with Scandinavian issuers.”

In terms of the pricing of Westpac’s deal the syndicate official said that the mid-twenties over offered fair value based on a Eu1bn seven year from ANZ trading at 23bp over, and a Westpac seven year trading at 22bp over.

“It’s a diversification angle for the investors to get involved and it’s an opportunity for them to buy a name with a better spread,” he added. “Westpac is a double-A name with triple-A-rated covered bonds, and at those spreads it is always attractive.”

Westpac’s deal is the third Australian euro benchmark covered bond of the year. In January ANZ Banking Group priced a Eu1.25bn 10 year at 36bp over, and Commonwealth Bank of Australia issued a Eu1bn five year at 18bp over. The syndicate banker away from today’s deal said he does not expect further euro benchmark deals from Australian issuers in the near future but added that issuers seem “pretty nimble” and are watching the markets closely.

“We don’t foresee anything immediately, but most issuers are open to looking at the senior and covered market,” he said.