National Australia Bank sold the tightest Australian euro benchmark since 2014 today (Tuesday), tightening pricing of a Eu1.25bn five year by 6bp on the back of over Eu2.5bn of orders, benefiting from sustained demand for five year paper and a relative lack of supply from the region.

The new issue is the first euro benchmark covered bond from Australia this year, with the last a Eu750m seven year for ANZ in November.

National Australia Bank (NAB) leads BNP Paribas, Credit Suisse, NAB and UBS launched the five year issue with guidance of the 8bp over mid-swaps area this morning. Guidance was later revised to the 4bp area, before the spread was fixed at 2bp and the size at Eu1.25bn (A$1.74bn) on the back of books over Eu2.5bn.

“It’s the first deal out of the region this year, and clearly that helps,” said a syndicate banker at one of the leads. “But the five year part of the curve is something that from an issuance standpoint right now seems to almost guarantee that you’ll get pretty deep demand.

“A lot of investors, especially the central bank community, had a lot of cash to put to work here, although we had a nice mix of investors across the board.”

The new issue is the tightest euro benchmark covered bond from Australia since November 2014, when ANZ priced a Eu1bn five year issue at 1bp over mid-swaps.

“It’s a good, tight price, both in outright terms and in terms of the premium,” said a banker away from the deal. “It shows nice spread development in the Aussie segment.”

Bankers said the deal offered a new issue premium of around 3bp, seeing NAB November 2022s quoted at around minus 1bp, mid.

The new issue is NAB’s first euro benchmark covered bond since November 2015, when it sold a Eu750m seven year. In 2016, it printed two US dollar benchmarks and one sterling benchmark.

Commonwealth Bank of Australia (CBA) could be the next Australian bank to tap the market, having announced a mandate yesterday (Monday) morning for a European roadshow commencing next Monday and concluding on Friday (31 March) ahead of a potential euro benchmark covered bond and/or senior unsecured transaction.