BNZ attracted some Eu1.3bn of orders for a Eu750m five year covered bond today (Friday), its first euro benchmark since 2012, and bankers said the New Zealand bank did well to price on top of a new issue of the same size and maturity from its more frequent peer Westpac NZ on Tuesday.

Bank of New Zealand’s last euro benchmark covered bond was in January 2012, when the NAB subsidiary sold a Eu500m May 2015 deal. Overall issuance from New Zealand has been relatively limited, with only one euro benchmark sold in 2014 and two in 2015.

However, Westpac New Zealand sold a Eu750m five year issue on Tuesday, which was also priced at 18bp over mid-swaps, down from initial price guidance of the low 20s, and attracted around Eu1.6bn of orders. ASB Finance on 5 April sold the only other international benchmark covered bond from the jurisdiction of the year, a Eu500m five year issue priced at 29bp.

BNZ International Funding announced a mandate for a five year issue yesterday (Thursday), following a European roadshow.

Leads DZ, HSBC, National Australia Bank and UBS launched the deal with guidance of the 20bp over mid-swaps area at 9:05 CET this morning, and then announced after around an hour and a half that the books were over Eu1bn. At 11:25 the deal was then re-offered at 18bp and the size fixed at Eu750m on the back of Eu1.3bn of orders.

“It’s a good print and another good sign for the New Zealand issuers,” said a banker away from the deal. “It was a slightly more aggressive start than Westpac NZ, but I think that reflected the tightening of those bonds on the secondary, and it seems appropriate.”

Westpac NZ’s new June 2021s were seen at 16bp, bid, pre-announcement, which bankers said implied a new issue premium of around 3bp for BNZ’s new issue. They said this was roughly in line with the premium offered by Westpac NZ.

Bankers said there is little differential between the two issuers, but added that it was nonetheless a good result for BNZ to have priced its new issue at the same level as Westpac NZ’s, given its four year absence from the market – whereas Westpac sold euro benchmarks in 2014 and 2015.

The covered bonds of BNZ and Westpac NZ are rated triple A by Moody’s and Fitch, and both issuers are rated Aa3/AA-/AA- (Moody’s/S&P/Fitch).

Bankers also noted that BNZ’s new issue, alongside Westpac NZ’s, is the joint tightest-priced euro benchmark from New Zealand.

“It’s certainly a positive sign for the New Zealand market,” said a syndicate official. “It hasn’t been the most active market or the quickest to develop, and sometimes deals have underwhelmed.

“But these guys have made the most of the supportive market dynamics for non-EU issuers, and they’re moving in the right direction.”

Bankers said that further euro issuance in the coming weeks will be restricted to narrow windows, with market volatility expected to increase in the run-up to the summer break on the back of an FOMC policy meeting next Wednesday, the UK referendum on EU membership on 23 June, the announcement of the take-up of a new series of TLTROs on 24 June, and a Spanish general election on 26 June.

“BNZ made a sensible choice,” said one. “Friday is usually not the most preferred day for execution, but it made sense given the event pipeline.

“Trades are still working fine and there will be further opportunities, but it’s getting more difficult and I’m not sure how many issuers will be motivated to take them.”