NAB will price the third covered bond of the week today (Wednesday), a Eu750m seven year that ultimately drew more than Eu1bn of demand and will be priced at the tight end of guidance after what some bankers away from the deal said was slower than expected bookbuilding.

Leads Barclays, Credit Suisse, NAB and RBS went out with initial price thoughts of the 28bp over mid-swaps area this morning before setting guidance at the 27bp over area with more than Eu700m of indications of interest collected. The order books were closed at 1430 UK time and stood in excess of Eu1bn shortly before then, with a Eu750m deal set to be priced at 26bp over, according to an update from the leads.

The deal is the issuer’s first euro benchmark covered bond since May 2013, when it sold a Eu750m 12 year at 33bp over, although it has since tapped the sterling and US market with covered bonds.

A syndicate official at one of the leads put fair value at 23bp over, citing Westpac March 2021s that were this morning at 22bp-23bp over.

A syndicate banker away from the leads said he was surprised by the transaction given weaker market conditions in the credit market, and that the amount of time the deal was at the IPT stage – more than two hours by his count – suggested the deal lacked momentum.

“The market did not look supportive this morning,” he said. “The credit side of things is weak, with more sellers than buyers. It is difficult to explain the weakness in the covered bond market this week, but there appears to be no appetite for primary.”

Another syndicate banker away from the leads said the deal was progressing “slower than expected”, with another adding that there was a lot of volatility in the market and that this had for example caused some accounts to hold back on a Eu1bn dual tranche Helaba deal yesterday. (See separate article for a review of Helaba’s deal.)

However, syndicate bankers did not take issue with the pricing, with one calling it “fair”, and some also felt the decision to tap the market was justified, with new issuance conditions still supportive.

“The market is still weaker and the widening hasn’t retraced since Thursday, but primary deals are going well, although new issue premiums are required,” said another syndicate banker away from the NAB deal this morning, saying that he expected pricing of around 26bp over.

A lead syndicate banker also said that the primary market was still open.

“There has been a little bit of market weakness in secondary in past few days, but equally so over the past weeks and months this hasn’t necessarily been a barrier to new issues coming,” he said. “We have seen days where spreads have widened and primary issues have come out – there is a dislocation in the sentiment between primary and secondary.”

He said that the issuer and the leads felt there was an issuance window today and tomorrow (Thursday) and decided to proceed with a deal today given a lack of competing supply, with the seven year filling a gap in NAB’s yield curve between 2017 and 2023.

“In addition, the issuer took into account that next week would effectively be ruled out by the UK bank holiday on Monday and European public holidays on Thursday,” he said.