Nationwide sold its first euro covered bond in nearly three years yesterday (Wednesday), a Eu1.75bn five and 15 year dual tranche deal, and an official at the issuer said it is delighted with the response to a transaction that was intended to make “a franchise-positive statement”.

The deal is the UK building society’s first euro benchmark covered bond since October 2011, and is a sign of Nationwide’s return to “business as usual funding flows”, according to David Wallis, head of funding at Nationwide Building Society, who said that this is due to a combination of the issuer’s retail franchise performing well, several bonds coming up for maturity, and the UK Funding for Lending Scheme – which Nationwide has used – no longer being open to the country’s mortgage banks.

Dual tranche structures are rare in the euro benchmark covered bond market, with Nationwide’s deal only the third two-parter this year, and the 15 year tranche was also the longest dated euro covered bond to be sold since September 2013.

“Given the length of our absence from the covered bond market we wanted to try to make a franchise-positive statement,” said Wallis. “One of the ways we thought we might achieve that would be via short-long dual tranche, reaching out to different investor bases.”

Confident that it would at least be able to sell a five year deal, the issuer announced the mandate for a euro deal on Tuesday afternoon but also set about gauging interest in a long dated tranche, according to Wallis.

“We were confident enough on Wednesday morning to put a 15 year alongside the five year tranche, which in itself was a positive statement, and were further delighted with the response we received,” he said. “It exceeded our expectations.”

Each tranche was well oversubscribed, with leads Barclays, Citi, UBS and UniCredit collecting Eu1.5bn of demand for a Eu750m 15 year tranche and some Eu2bn for a Eu1bn five year.

A Eu1bn deal was the goal from the outset for the five year tranche, according to Janusz Nelson, fixed income syndicate, FIG at Citi.

“On the 15 year, we initially envisaged printing at least Eu500m, but the demand we saw meant that we could tighten the spread and upsize,” he added.

The leads priced the Eu750m 15 year tranche at 31bp over mid-swaps, the tight end of guidance of the 33bp over area that followed initial price thoughts of the mid-30s over. The five year tranche was priced at 8bp over mid-swaps, the tight end of guidance of 8bp-10bp over that followed IPTs of the 10bp over area.

“On the five year tranche, once guidance was announced at 8bp-10bp, the books grew quickly and eventually reached Eu2bn,” said Nelson. “We printed at the tight end of the range and with the Eu2bn order book we could comfortably support a Eu1bn trade.

“Both tranches went very well, showing the demand for UK covered bonds in general and in particular the Nationwide name.”

Yesterday’s deal is not the first UK dual tranche covered bond in euros, with Nationwide itself having sold a five and 15 year issue in February 2007. That comprised a Eu2bn five year at 1bp through mid-swaps and a Eu2bn 15 year at 7bp over.

The other two dual tranche deals this year were for Italy’s UniCredit, which included a floating rate note, and Germany’s Landesbank Hessen-Thüringen (Helaba).

On yesterday’s deal, of the five year bonds, Germany and Austria were allocated 31%, the UK and Ireland 30%, the Nordics 12%, the Benelux 10%, Asia 5%, Switzerland 2%, France 1%, and others 9%. Asset managers took 35%, banks and private banks 33%, SSAs 16%, insurance companies and pension funds 11%, and corporates 5%.

On the 15 year tranche, Germany and Austria took 74%, the UK and Ireland 6%, Switzerland 5%, the Nordics 4%, the Benelux 4%, Asia 2%, and others 5%. Asset managers were allocated 37%, insurance companies and pension funds 31%, banks and private banks 26%, and SSAs 6%.