ANZ sold a Eu750m seven year covered bond today (Tuesday) that is the tightest euro benchmark from Australia in two years, but a lack of book updates and only modest price tightening cast doubt on its reception. Caja Rural de Navarra is due to issue a debut sustainable cédulas tomorrow.

Covered bonds have enjoyed mixed fortunes this week, against a backdrop of volatility in yields and government bond spreads. A Eu1bn 10 year cédulas for BBVA was only marginally subscribed yesterday, while deals for Nordea Mortgage Bank and Crédit Agricole (see separate article) were more successful – results that were partly interpreted as evidence of investors preferring issuance from core, lower beta names.

ANZ completed a European roadshow last week, having flagged that it could subsequently launch a covered bond and/or senior unsecured euro benchmark, and opted for just the covered bond today.

Leads ANZ, BNP, HSBC and UBS launched the seven year euro benchmark with initial guidance of the low teens over mid-swaps area this morning. Guidance was then revised to the 10bp area, before the spread was fixed at 10bp. The size of the order book was not reported.

“From the outside, it looks like they scraped over the line,” said a syndicate banker away from the leads. “I think an Aussie, not being ECB repo-eligible, just isn’t the right name with markets being tricky to navigate, especially at a spread that is historically tight by Aussie standards.”

The deal is the tightest euro benchmark covered bond from Australia with a maturity of seven years or longer since October 2014, when Commonwealth Bank of Australia priced a Eu1bn November 2021 issue at 7bp.

Bankers suggested that demand for the new issue could also have been muted because ANZ subsidiary ANZ New Zealand sold a Eu1bn seven year issue on 13 September.

“Coming back with another seven year already feels too soon to me,” said one.

Bankers said the deal offered a new issue premium of around 4bp, seeing ANZ August 2023s at 6bp, bid.

The deal is ANZ’s first euro benchmark covered bond since 2014, when it sold a Eu1bn November 2019 issue. It has since sold a $1.25bn May 2020 issue in May 2015 and a £500m February 2019 deal in February of this year.

Market participants said today that the widespread rates volatility following the US election appeared to be easing, and said this would be conducive for further covered bond supply, with a handful of issuers said to be monitoring the market.

Caja Rural de Navarra is set to launch a debut sustainable cédulas hipotecarias, having completed a European roadshow on Friday and announced a mandate today for a Eu500m no-grow seven year issue.

A banker at one of leads Banco Cooperativo Español, Barclays, BBVA, Crédit Agricole and DZ said that the deal will be launched tomorrow (Wednesday), subject to market conditions.

“The expected issue has been slightly delayed by the massive widening in Spanish govvies that we have seen in recent days, and BBVA’s 10 year yesterday was not exactly the door opener that they would have hoped for,” he said. “But we are reassessing today and I do get the sense that things are calming down, both in Bonos and in the wider market.

“With that in mind, we are on track.”