Westpac is inaugurating New Zealand covered bond legislation with a Eu750m five year issue whose pricing was endorsed by bankers away from the leads, while the UK’s Nationwide is expected to tomorrow (Wednesday) launch its first euro issue since October 2011.

Westpac New Zealand’s deal, the first legislative covered bond from the country, will be priced at 20bp over mid-swaps, the tight end of guidance of the 22bp over plus/minus 2bp area. Leads Barclays, UBS and Westpac went out with initial price thoughts of the 25bp over area this (Tuesday) morning, a level that generated more than Eu750m indications of interest, according to a syndicate banker on the deal.

“It’s making very good progress,” he said at the time.

The book closed with some Eu1.25bn of orders having been placed.

The deal comes after a roadshow, and had been expected for this week.

The re-offer spread of 20bp over was endorsed by syndicate bankers away from the transaction, who said that it is roughly where they would have priced the deal.

One said New Zealand covered bonds should come 4bp-5bp back of Australian paper, and cited a Commonwealth Bank of Australia January 2019 at 12bp over as indicating that a new five year Australian issue would come at around 16bp over. Another syndicate official looked to a Eu1bn five year for Royal Bank of Canada that was priced on Thursday, and said that Australian covered bonds trade 5bp-7bp wide of Canadian supply, with an additional 5bp needed for New Zealand issuance.

He suggested the 25bp over area was perhaps somewhat of a generous starting point, but that around 20bp over would be fair.

At 20bp over, Westpac is coming 5bp tighter than where the last euro benchmark New Zealand covered bond was priced – ASB Finance Limited sold a Eu500m five year at 25bp over in October. ASB Bank has been arranging investor meetings with CBA and JP Morgan, but it does not yet have a covered bond programme registered with the Reserve Bank of New Zealand, a requirement under the country’s covered bond framework. Westpac is the only New Zealand covered bond issuer to have a registered programme.

New Zealand covered bond legislation came into effect in December.

Nationwide nears euro return

Nationwide Building Society announced the mandate for a euro covered bond today, which leads Barclays, Citi, UBS and UniCredit are targeting for launch tomorrow, according to a syndicate banker at one of the leads.

Another syndicate official said that there is also talk of Benelux and German issuers eyeing the market for deals this week.

The Nationwide leads are circulating comparables today, including Nationwide outstandings such as 3.5% December 2015s and 3.125% October 2016s at i-spreads of 5bp through, a 4.625% February 2021 at 3bp over and a 4.375% February 2022 issue at 5bp over.

Nationwide last tapped the euro market in October 2011, selling a Eu1.5bn five year at 130bp over, and then the sterling market, in January 2012.

A syndicate banker away from the leads put the October 2016s at 3bp through, and the 2021s and 2022s at 4bp and 6bp over, saying a five year would make sense from a maturity profile point of view.

A deal from Nationwide would only be the third UK euro benchmark covered bond to hit the market this year, after a deal for Lloyds Banking Group in early April and Yorkshire Building Society on 4 June. That was a Eu500m seven year at 22bp over, which was today said to be trading at 19.5bp over. Lloyds’ and Yorkshire’s benchmarks were very well received, garnering strong levels of oversubscription.