ANZ New Zealand attracted over Eu1.7bn of orders to a Eu1bn seven year covered bond today (Tuesday), in the first benchmark shorter than 10 years for almost two months, while Bank of Nova Scotia is in the market with a five year dollar.

ANZ NZ’s deal is the first new benchmark in the euro covered bond market to have a maturity of less than 10 years since 18 July, when Canadian Imperial Bank of Commerce (CIBC) sold a negative yielding Eu1.25bn six year issue. Issuers have since stayed in the long end of the curve while the euro swap rate was negative out to six years and barely positive at seven years, but after a back-up in yields on Friday, bankers said that shorter maturities were viable once again.

ANZ New Zealand leads ANZ, BNP Paribas, DZ Bank and UBS launched the seven year issue this morning with guidance of the 17bp over mid-swaps area, before revising guidance to the 14bp area on the back of books “well above” Eu1.6bn. The spread was then set at 12bp and the size at Eu1bn with books at Eu1.8bn, pre-reconciliation. The final order book was over Eu1.7bn, with over 110 accounts.

The deal had been expected to be launched this week after ANZ NZ completed a roadshow on Friday, but the New Zealand issuer and its leads yesterday (Monday) decided to hold off after a weakening of market conditions.

“There was a bit of volatility spilling over from the US and Asia first thing yesterday morning,” said a banker at the one of the leads, “and on top of that the basis swap moved to the detriment of the trade.

“So we gave it a day for things to settle down, and they did. It was good to wait and we are very pleased with the result.”

The deal was priced with a yield of 18bp. Bankers noted that the seven year swap rate had fallen slightly from 8bp yesterday to 5.5bp this morning, but said this was still 10bp higher than its lowest level last week.

“The back-up in rates helped, as it means they can offer more yield, but as one of the names that offers a higher spread pick-up, ANZ could probably have done this deal last week anyway,” said a syndicate banker away from the deal. “Offering a new issue premium, they probably could have done a five year issue today and ended up with a yield around zero.”

Bankers away from the leads said deal offered a new issue premium of around 5bp, seeing ANZ NZ January 2022s at 7bp, mid, ABS Bank Finance April 2021s at 7bp and Westpac June 2021s at 8bp. The lead syndicate banker put the premium at close to zero based on the curve extension and bid levels.

“We left nothing on the table to speak of,” he said. “That’s how it goes these days. People accepted the 5bp move – they had no choice.

“It’s an issuer’s market.”

Bank of Nova Scotia leads Barclays, Goldman Sachs, HSBC, Scotiabank and UBS launched the Canadian bank’s 144A five year US dollar issue with guidance of the 65bp over mid-swaps area.

The last 144A dollar benchmark covered bond was a $1.5bn five year for Bank of Montreal on 8 June. Priced at 66bp over, it was the tightest 144A benchmark so far this year.