NAB sold a £450m five year issue today (Friday), rounding off a week of global covered bond activity, with CBA having priced a A$2.3bn offering and Bank of China a US$500m secured green bond. A euro revival is foreseen next week – subject to the outcome of the US election.

Sterling supply has been limited since the UK’s vote to leave the EU in the summer, with only £1.25bn across three benchmarks sold since the referendum on 23 June. The last was a £500m five year fixed rate issue for Bank of Nova Scotia on 7 September that impressed bankers with its size, being the joint-largest sterling covered bond from a non-UK issuer this year.

“The five year fixed trade from BNS went very well,” said a banker at one of NAB’s leads. “The thinking with our trade was that the Canadian and Aussie covered bond pricing and model is very similar, so the intention was to take advantage of the follow-on demand that was left from that trade.

“Especially with the issuer having not been to the sterling market in three years, and having only one sterling trade outstanding – which are September 2026s – there was a clear opportunity.”

After announcing a mandate yesterday (Thursday) afternoon, National Australia Bank leads Credit Suisse, NAB and Nomura launched the five year fixed rate issue this morning with initial price thoughts of the 65bp over mid-swaps area. Guidance was then set at the 65bp area plus or minus 2bp, on the back of over £400m of orders. The book closed at 12:30 GMT, before the spread was set at 63bp and the size at £450m (A$726m, Eu502m), with the book having “increased marginally” since the guidance update.

Syndicate bankers at and away from the leads said the deal offered a new issue premium of around 2bp, seeing Bank of Nova Scotia’s September 2021s at around 61bp, bid, 2bp inside re-offer.

“That looks appropriate,” said a syndicate banker away from the deal. “In sterling covereds, whether it’s fixed or floating, it’s not really about calculating the premium from secondary curves, but it’s more about where the last trade came and pricing it straight off that.”

The sterling covered bond was sold in a dual tranche offering alongside a seven year euro senior unsecured bond, which was lead managed by Credit Suisse, Deutsche, JP Morgan and NAB. The Eu500m issue was priced at 45bp over mid-swaps, down from initial price thoughts of the 50bp area, with the order book closing at over Eu800m.

Bankers suggested that further opportunistic sterling deals could follow in the coming weeks.

“The sterling market had a very active period back at the start of August with a nice range of supply across the bank space, albeit mostly in senior,” said a syndicate banker. “There was then a period where the market was closed a few weeks ago, but since then we’ve had a few trades across corporates and high yields, and with investors sat on decent cash balances it feels a lot more receptive.

“It’s just about waiting for the right opportunities to arise, and following on from the success of BNS, this new one for NAB seems like that sort of opportunistic trade that people will now be thinking about.”

The new issue is NAB’s first sterling benchmark covered bond since August 2013, when it sold a £500m floating rate note that matured in August of this year. The Australian bank has sold one other benchmark covered bond this year, a US$1.4bn (A$1.83bn, Eu1.26bn) five year issue in March.

Commonwealth Bank of Australia (CBA) today priced a A$2.3bn (Eu1.59bn) triple tranche covered bond, concluding a two-day execution process. The self-led deal comprised a A$1.4bn five year FRN priced at 85bp over three month BBSW, a A$700m five year fixed rate tranche priced at 85bp over swaps, and a A$200m 10 year tranche priced at 102 over swaps.

The Australian bank announced the self-led deal on Wednesday, giving initial price thoughts of the mid-to-high 80s for the floating and fixed rate five year tranches and swaps plus the low 100s for the 10 year tranche. Guidance was yesterday set at the 85bp-88bp area for the five year tranches and the 100bp-103bp area for the 10 year.

Bank of China (BOC) yesterday afternoon, European time, priced its $500m (RMB3.38bn, Eu451m) three year Reg S issue at 95bp over Treasuries, with the book closing at $900m. The deal was launched yesterday morning with initial price thoughts of the 115bp area, before guidance was set at the 95bp-100bp area, will price within range, on the back of over $1.2bn of orders.

Some 49 accounts were in the order book, with banks taking 73%, asset managers 17%, insurance companies 5%, private banks 4$, and sovereign wealth funds 1%. Accounts from Asia were allocated 72% and Europe 28%.

The dual recourse transaction is backed by a portfolio of 11 green bonds from six issuers. The deal is the first from China to be marketed as a covered bond, although some market participants have questioned whether the deal should appropriately be classified as a covered bond.

No euro benchmark covered bond supply surfaced this week, with the last deal a Eu750m 10 year issue for BRFkredit on Thursday of last week. The start of next week is expected to remain similarly quiet across markets in anticipation of the US presidential election on Tuesday, but bankers said that several issuers will be considering entering the euro market, depending on the result.

“Post-election, if it’s a victory for Hillary, I think it could be quite busy in the second half of the week and going forward,” said one. “There’ll only be two weeks left of November and December has a number of risks that we’ll need to navigate, so it looks like the best time to go.”

Although no deals have been publicly announced for execution next week, three issuers will be on the road ahead of potential euro benchmark deals. Caja Rural de Navarra is marketing a debut sustainable cédulas, Nordea is set to launch a first deal from a newly establishing Finnish issuing entity, and ANZ is meeting investors ahead of a covered bond and/or a senior unsecured issue. All will be launched in the following week (commencing 14 November), subject to market conditions, according to bankers close to the deals.