CBA sold a twice subscribed Eu1.25bn 10 year issue today (Wednesday) that impressed with its size, although some bankers said the Australian issuer had been unnecessarily generous by offering some 10bp of premium at the initial guidance. HSH Nordbank tapped by Eu350m an April 2023 Pfandbrief.

CBA’s deal is the largest single-tranche euro-denominated covered bond for an Australian issuer since January 2015, when Westpac sold a Eu1.25bn (A$1.84bn) 2022 issue.

Commonwealth Bank of Australia leads Barclays, CBA, Credit Suisse, and Deutsche launched the 10 year issue with guidance of the mid to high 20s, before revising guidance to 22bp plus or minus 2bp with books at Eu2.5bn. The spread was then fixed at 20bp and the size at Eu1.25bn.

“It’s gone very well,” said a banker at one of the leads. “It’s the biggest euro covered bond from Australia for quite a while and it’s twice subscribed.”

However, some syndicate officials away from the leads said the deal could comfortably have been priced tighter, given very supportive market conditions.

“The starting point looked relatively friendly to investors,” said one. “I think it’s fair to say they were more generous than they needed to be.”

Bankers said the initial guidance level offered a new issue premium of around 10bp, seeing National Australia Bank 2025s at 12bp, mid, and 2027s at 17bp. They noted that the final premium of some 4bp-5bp is still substantially larger than that offered by a Eu1.25bn six year CIBC deal on Monday, which like CBA’s deal is ineligible for CBPP3, although the Canadian bank’s issuance is ECB repo-eligible.

“We’ve had Germanic taps paying at most 1bp-2bp premium, and CIBC selling a negative yielding benchmark just 1bp back from its secondary curve,” said the syndicate official. “There’s really been nothing that’s offered anything like this kind of concession for quite a while.”

Another syndicate official away from the deal said the approach to pricing was nevertheless understandable.

“Yes, 10bp looks generous as a starting point compared to what we’re used to in these last few weeks,” he said. “But Australian names have historically not been the easiest in this market, and they have been known to struggle.

“In a market this liquid, a 10 year deal offering reasonable spread and a reasonable yield is never going to struggle, but I can understand why they took a more cautious approach.”

CBA’s new issue is only the third euro benchmark covered bond from an Australian issuer this year, following a dual-tranche issue from CBA in January and a Eu500m debut from Macquarie Bank in February. Fellow Australian issuers Westpac and NAB each launched US dollar-denominated benchmarks, in February and March, respectively.

“For the Australian issuers there has been favourable arbitrage with US dollars, so that has been their focus recently, doing a few private placements in the currency, also,” said a syndicate official. “Now spreads are tighter in euros it is a good time for them to diversify in terms of currency.”

HSH Nordbank leads BNP Paribas, Commerzbank, DZ, HSH Nordbank, and Nomura reopened the German bank’s April 2023 issue this morning with guidance of the 20bp over mid-swaps area, before fixing the spread at 18bp and the tap size at Eu350m on the back of over Eu400m of orders, including Eu80m of joint lead manager interest.

The original Eu500m issue was priced on 20 April at 23bp over mid-swaps.

Syndicate officials said the tap offered little to no new issue premium, seeing the deal trading pre-announcement at around 18bp, mid. The trade offered a pick-up of 63bp versus Bunds, they added.

The deal is the fifth tap by a German issuer this month. WL Bank yesterday (Tuesday) tapped a Eu625m February 2026 issue by Eu250m on the back of Eu400m of demand, while MünchenerHyp, Commerzbank and Deutsche Hypo have each tapped outstanding euro Pfandbriefe since the market reopened on 4 July after the Brexit referendum.

“It’s the same story, limited size means very limited premium,” said a syndicate official away from the deal. “It’s very cheap funding at very low yields.”

Bankers noted that HSH’s deal offered a marginal positive yield of 0.198%, whereas Deutsche Hypo’s tap of a tighter February 2023 issue on Friday yielded minus 0.0711%.