ABN Amro sold the largest single-tranche covered bond since 2012 today (Wednesday), a Eu2.25bn 15 year issue, and bankers said the Dutch benchmark, following a successful 10 year for Caffil, shows that longer dated supply is “shining” on its comeback after recent undersupply.

After a Eu1.5bn 15 year for Crédit Agricole on 16 March, Caffil’s twice-oversubscribed Eu1.25bn 10 year issue yesterday (Tuesday) was only the second 10 year or longer supply since January. Bankers said the French issue found strong demand because of the undersupply at the long end, with most recent deals having been focussed in the seven year maturity.

ABN’s deal is only the fourth benchmark covered bond with a maturity of 15 years or longer to be printed this year, while each of the previous three were part of dual-tranche issues – including Crédit Agricole’s, which was the most recent.

“Long dated paper has made a bit of a shining return,” said a banker. “We have not seen much of this for ages, given the yield environment, but now we have seen the Crédit Agricole work well, the Caffil work well, and now ABN.”

ABN Amro leads ABN Amro, BNP Paribas, Crédit Agricole, Danske and LBBW launched the 15 year Dutch issue with initial price thoughts of the high 20s over mid-swaps at 10:30 CET.

A syndicate official at one of the leads said ABN Amro launched the deal relatively late in order to monitor how market conditions developed through early trading. He said the issuer and the leads decided to go ahead after seeing an encouraging early update regarding another 15 year issue, from the EU, in the SSA space.

“Yesterday we saw a substantial drop in rates, which could be quite a problem for this type of deal,” he said. “The footing today was more stable, and when it became clear that the EU’s deal was going very well, taking Eu1.75bn of orders in the same maturity bucket, we were confident to go ahead.”

ABN Amro’s leads then skipped a guidance level to re-offer the deal at 26bp on the back of over Eu2.3bn of orders at 11:40. The books closed at around Eu3bn at 12:30, with the size being set at Eu2.25bn.

The deal is the largest single-tranche euro-denominated covered bond since January 2012, when Nordea Bank Finland sold a Eu2.25bn July 2017 issue.

“It is one of the largest euro covered bonds in recent history, which is heavily surprising given the tenor,” said the lead syndicate official. “There is clearly strong and high quality demand in this part of the curve, which paved the way for a deal of this size.”

Syndicate officials away from the leads agreed.

“It’s a very strong reception,” said one, “and a big, big deal.

“It shows that there is increasing depth in the longer end of the market, where you’re able to take out sizable 10 and 15 year trades in the space of two days.”

Syndicate officials said the deal offered a new issue premium of 8bp-11bp, with some citing ABN Amro September 2030s at around 15bp, bid, and others seeing the same paper at around 15bp, mid.

“It looks a relatively chunky concession,” said one. “But for a 15 year that sort of premium is not outrageous, and they were clearly going for size.”

ABN Amro has sold one benchmark covered bond already this year, a Eu1.25bn 10 year issue on 7 January. The Dutch issuer has previously only sold one benchmark in each of the last three years, printing the Eu1.5bn September 2030 issue in September last year.

“September, January and now April is a pretty quick pace for ABN – and each of them pretty big deals,” added a banker away from the leads.

Bankers said the strong demand for the new ABN Amro and Caffil issues will likely encourage more issuers to tap the long end in the coming weeks.

“These two deals are different stories,” said a syndicate official from one of Caffil’s leads. “Caffil paid a premium of around 5bp, whereas ABN paid quite a bit more. Caffil was a relative value trade, with a lot of people looking at the pick-up from OATs, while ABN is more of a coupon trade.

“But these deals show the long end is wide open, both in 10 years and further out the curve, but I would especially expect to see more follow Caffil into the 10 year maturity.”

A syndicate official at one of ABN Amro’s leads said the deal is expected to price with a coupon of 1%.

Bankers close to yesterday’s Caisse Française de Financement Local (Caffil) highlighted the granularity of the order book as showing that appetite is increasing for longer-dated paper.

Leads Barclays, Commerzbank, Deutsche, Natixis and UBS priced the 10 year obligations foncières at 14bp over mid-swaps, from initial guidance of the 18bp area, attracting Eu2.5bn of orders.

Some 83 accounts were in the final order book, with central banks and official institutions taking 37%, insurance companies 27%, banks 23% and funds 13%. Accounts from Germany and Austria were allocated 39%, France 31%, the Benelux 8%, Asia 6%, the Nordics 6%, the UK 5%, Switzerland 3%, and others 2%.

“This new issue confirms that traditional covered bond investors are back and illustrates the investors’ confidence in CAFFIL and its parent company SFIL, ,” said Philippe Mills, chairman and CEO of SFIL and chairman of the supervisory board of Caffil.