Nationwide will price its first euro covered bond since October 2011 today (Wednesday), a Eu1.75bn (£1.40bn) dual tranche issue that was complimented for catering to demand for duration while also targeting a deep bank treasury bid in the belly of the curve.

The mandate for a euro transaction from Nationwide Building Society was announced yesterday (Tuesday) afternoon, with leads Barclays, Citi, UBS and UniCredit this morning going out with a 15 year and five year dual tranche issue after having yesterday circulated relevant comparables.

More than Eu3bn of demand in total was placed for the deal, with this understood to have been skewed toward the five year tranche. This has been sized at Eu1bn and is being priced at 8bp over mid-swaps, and a Eu750m 15 year at 31bp over.

The five year tranche was first marketed with initial price thoughts of the 10bp over area before guidance was set at 8bp-10bp over, while IPTs for the 15 year were set in the mid-30s over before guidance of the 33bp over area.

The 15 year tranche is the longest dated covered bond of the year – a Eu1.25bn 12 year for Intesa Sanpaolo was the previous longest of 2014 – and the first 15 year new issue since late September, when Caisse Française de Financement Local (Caffil) raised Eu500m in the maturity.

UK benchmark covered bond supply has been thin on the ground in recent years, and today’s deal for Nationwide is only the third UK euro issue of the year. Lloyds Banking Group sold a Eu1bn seven year at 15bp over in April and Yorkshire Building Society a Eu500m seven year at 22bp over in early June.

A syndicate banker at one of the Nationwide leads said that the issuer opted for a dual tranche transaction to take advantage of the demand for duration that has manifested itself following recent ECB moves but also to ensure a sizeable transaction, with a five year deal having been “the base case”.

“France is trading at around 30bp-31bp over so the mid-30s offers a spread to France, which works for the French and Germans,” he said. “We also saw a good issue for Lloyds in seven years, so definitely felt that there is good demand in the belly of the curve.

“Going for a five year and a 15 year gives you both types of investors and the issuer can take advantage of low rates and the demand for duration.”

One banker away from the deal questioned the benefits of opting for a dual tranche format and, focussing on the five year, said that IPTs looked generous, but others away from the leads had no such qualms and complimented the deal.

“It’s a really sensible trade and has been done quite well,” said one. “It’s quite neat – you’re taking out good size, one visit, minimal concession, there’s something for everyone and on a day when there’s not a long of agency product around.”

He said that the Nationwide five year tranche was coming with a new issue premium of some 3bp, based on where a Lloyds Banking Group April 2021 from this year is trading and adjusting for the curve, and that this is in line with the new issue concessions Scandinavian issuers have been paying.

Another said it was “a lovely trade”.

“I like it a lot,” he said. “It’s priced aggressively and they looked at different investors. Five years is very much bank treasury-driven and where there’s the most depth, but there’s also reverse in the long end and people want to see more there.”

The outcome of the 15 year tranche surprised to the upside, he added.