Belfius Bank launched the first Belgian public sector-backed covered bond benchmark yesterday (Monday), a Eu1.25bn seven year issue that the Belgian bank will now run alongside its mortgage-backed programme, according to an official at the issuer.

Leads Barclays, Belfius, Commerzbank, LBBW and Natixis went out with initial price thoughts of mid-swaps plus the mid-single-digits yesterday morning, then opened books at guidance of the 3bp area after having taken Eu1.5bn of indications of interest. The deal was ultimately priced at 1bp over mid-swaps on the back of a Eu2.3bn order book comprising 115 accounts.

The leads putting the re-offer level at flat to the issuer’s secondary curve, which is comprised of mortgage-backed issuance.

Ellen Van Steen, head of long term funding at Belfius, said that the issuer is very pleased with the outcome of the transaction.

“The covered bond market performed very well during the weeks following the ECB announcement, so the conditions were very good to launch our inaugural pandbrieven transaction,” she told The CBR. “The size and pricing confirm the interest of investors for covered bonds and new programmes.”

Germany and Austria were allocated 48%, France 10%, the UK 8%, the Benelux 8%, Switzerland 7%, the Nordics 6%, Asia 6%, Italy 4%, and others 3%. Banks took 45%, asset managers 35%, central banks and public institutions 13%, and insurance companies and pension funds 7%.

The deal is the first Belgian covered bond (pandbrieven) backed by public sector assets and Belfius undertook an extensive roadshow ahead of the deal to present the new programme and also its H1 2014 figures, according to Van Steen. The covered bonds are backed solely by loans to Belgian local authorities.

“Key elements of the new public pandbrieven programme are the high quality of the new instrument – i.e. Aaa rating from Moody’s and AAA from S&P – strong Belgian covered bond legislation, the exposure to the Belgian public sector, and the very high quality of the cover assets,” she said. “The feedback of the roadshow was very positive, with strong interest for Belfius’s name and for the new product.”

Belfius opened the Belgian market in November 2012 with issuance off its mortgage-backed programme and will now run the two programmes alongside each other.

“This second pandbrieven programme has been set up to continue the strategy of diversification of funding sources,” said Van Steen. “In the future, Belfius will issue benchmark issues and private placements under both the mortgage pandbrieven and the public pandbrieven programmes, depending on market conditions, interest from investors and funding needs.”