Coventry Building Society is today (Friday) pricing a Eu500m seven year covered bond 1bp inside a Eu1bn seven year for Nationwide on Wednesday, despite being the fourth non-Eurozone seven year deal in four days, with TD having wrapped up a Eu1bn issue yesterday.

Coventry had on Tuesday finished a roadshow ahead of its first euro benchmark in three years and was expected later in the week. In the meantime, Australia’s CBA sold a Eu1bn seven year issue at 7bp over on Tuesday, the UK’s Nationwide its Eu1bn seven year at 4bp over on Wednesday, and Canada’s Toronto-Dominion Bank a Eu1bn seven year at 5bp over yesterday (Thursday).

Some market participants had earlier this week noted that Coventry can be regarded as a weaker name than Nationwide, but it was able to achieve pricing inside its fellow UK issuer, with bankers attributing this achievement to the issue size being limited to Eu500m.

“Clearly it is because it was a Eu500m no-grow,” said one. “That gave them a lot more leverage over price, hence their getting a print inside Nationwide.

“It would have been a different story had it been Eu1bn.”

Bookrunners Danske, HSBC, Natixis and UniCredit followed up on the roadshow by yesterday flatting today for launch, and this morning – after “exceptionally strong IOIs even without any IPTS”, according to a lead banker – they went out with guidance for the Eu500m no-grow of mid-swaps plus 5bp-7bp. With books over Eu1.2bn and an “excellent and rapid response to the deal”, the guidance was revised to the 4bp area (+/- 1bp), and the spread ultimately set at 3bp over mid-swaps, with the final book totalling some Eu1.4bn, comprising more than 60 accounts.

Toronto-Dominion priced its Eu1bn seven year at 5bp over mid-swaps on the back of an order book of over Eu1.5bn comprising 68 accounts.

Leads Barclays, BNP Paribas, Lloyds and TD had announced the mandated on Wednesday and then went out yesterday morning with IPTs of the high single-digits area, garnering Eu1bn of indications of interest in an hour. They then revised this to guidance of the 6bp area on the back of Eu1.3bn of demand, before fixing the spread at 5p over, with minimal price sensitivity allowing allocations to the highest quality accounts, according a lead syndicate banker. He said the pricing represented a new issue premium of 2bp-3bp.

He said that distribution to asset managers, at 27%, was relatively high for a Canadian covered bonds. Banks were the main takers, with 43%, while central banks and official institutions took 20%, pension funds and insurance companies 7%, and corporates 3%. Germany and Austria were allocated 33%, France 19%, the UK and Ireland 16%, Nordics 13%, Switzerland 7%, the Benelux 4%, and others 8%.

The lead banker said that the deal had gone very well, with the outcome needing to be viewed in the context of it being the third seven year in three days – and with Coventry due.

“This is a strong testament to how strong the market is,” he said. “In the past, if you had seen two seven year deals in a row you would never have attempted another after.

“But we have seen four seven year non-CBPP3 deals now, all with the same ballpark pricing and all of which have been oversubscribed and performed well. And that, in spite of a relatively volatile rates backdrop and all the other data and headlines there has been.”

On Wednesday Nationwide Building Society had accessed the market with its Eu1bn seven year deal at short notice.

“We were looking at what funding opportunities we had at this point in time, and out of all the markets the covered bond market looked the most attractive to us,” said Sarah Robinson, senior manager in Nationwide’s funding team.

She said that when Nationwide went ahead with its deal it knew that it would not be conflicting, Coventry having indicated that it was not targeting Wednesday for launch.

Nationwide’s last euro benchmark covered bond issuance was in June and was split into Eu1bn five and Eu750m 15 year tranches.

“Having done the five and 15 years, and also taking on board feedback from the market, we looked at seven and 10 years and both trades were potentially there,” said Robinson, “but we felt that there was slightly more certainty around a seven year. Given the rate environment at the moment, some investors were a little more uncertain regarding 10 years.”

Leads Barclays, BNP Paribas, Commerzbank and HSBC announced the mandate on Tuesday afternoon and on Wednesday morning went out with IPTs of the 7bp over mid-swaps area. After indications of interest topped Eu1bn in just over an hour guidance was revised to the mid-swaps plus 5bp area and the size capped at Eu1bn. A banker at one of the leads said that this encouraged further growth in the order book, enabling Nationwide to fix the spread at 4bp, with final books above Eu1.6bn.

Robinson said that the pricing was in line with what Nationwide had hoped for.

“Obviously there’s been a bit of volatility over the last week or so,” she said. “Nationwide always try to engage constructively with our investors and seek to do the right deal matching price and maturity expectations as much as possible. We were delighted with the positive response we received once again from the covered bond community despite covered bond spreads having squeezed tighter.

“So we are quite comfortable with where it priced and hope that investors are, too, given the feedback that they gave us.”

Robinson said distribution was in line with expectations, with strong demand from Germany and Austria (with 45% of allocations) and good demand also evident from the UK (with Ireland, 17%) and the Nordics (14%). She noted that French demand was “a touch lower” than historically (and allocated 9%), but said this was anticipated given the spread versus OATs at the moment. Asian accounts were allocated 6%, the Benelux 4%, Switzerland 3%, and southern Europe 2%.

Banks took 29%, fund managers 32%, central banks and official institutions 14%, insurance companies and pension funds 12%, and others 3%.

“It’s another positive experience for us in the euro covered bond market,” said Robinson. “We are very pleased with the transaction, with the size of the book, and hopefully it’s a fair trade for everyone all round.”