Bank of Ireland Mortgage Bank took around Eu1bn of orders for a Eu750m February 2021 covered bond issue yesterday (Monday), and an official at the issuer said the distribution profile was a highlight while noting the spread compared favourably to past Irish deals even given a double-digit premium.

Leads Citi, HSBC, Morgan Stanley, Nomura and SG priced the Eu750m February 2021 issue at 33bp over mid-swaps and build a final order book of over Eu1bn. The deal was launched with initial price thoughts of the 35bp area, before guidance was set at 33bp-35bp and the spread then fixed at 33bp.

“We are very happy with the deal,” said Redmond O’Leary, head of long term funding and securitisation at Bank of Ireland. “The key highlights are firstly the level of oversubscription – circa 1.4 times covered – and secondly the quality of the order book, with strong real money participation combined with the lower amount of ECB purchases compared to many recent transactions.

“Finally, the quality and size of the order book provided us with the ability to both issue a deal at the larger end of our size aspirations and at the same time tighten pricing from IPTs by 2bp.”

Asset managers were allocated 45% of the deal, central banks and official institutions 27%, banks and private banks 17%, insurance companies and pension funds 8%, and others 3%. Accounts from Germany took 31%, Ireland 26%, the UK 15%, the Benelux 11%, Italy 3%, France 3%, Asia 2%, the Nordics 2%, Switzerland 2%, and others 5%.

A syndicate official at one of Bank of Ireland’s leads said the new issue was trading 2.5bp tighter this (Tuesday) morning.

O’Leary said Bank of Ireland decided to launch the deal on Monday, in spite of recent challenging conditions, after seeing a good period of stability and positive sentiment in the wider market last week.

“Following a couple of weeks of stability with limited new primary supply the timing felt right,” he said. “While the last benchmark transaction from Bank of Ireland was a seven year in April, we were also conscious of competing supply and had a preference to be ahead of any additional supply.”

Bank of Ireland’s Eu1bn seven year issue in April was priced at 5bp over mid-swaps and was only marginally oversubscribed, gathering Eu1.1bn of demand, after the execution was hit by a back-up in yields, with the market closing for three weeks thereafter.

Syndicate officials away from Bank of Ireland’s new issue noted that its spread was substantially wider than the previous deal but said this reflected recent moves in the market, seeing outstanding Irish covered bonds quoted at around 20bp, bid, in the five year part of the curve.

O’Leary also noted that Bank of Ireland’s closest comparable outstanding deal was a five year issue priced at 20bp over mid-swaps in January.

“This new issue offers a new issue premium over our secondary bonds, symptomatic of the current market, and is very attractive pricing when compared to pricing for Irish covered bonds in recent years,” he said.

O’Leary added that Bank of Ireland is unlikely to issue any further benchmark covered bonds this year, with any further covered bond issuance being in the form of private placements.