A Eu500m 10 year covered bond for de Volksbank attracted just Eu585m of orders today (Wednesday), with its spread revised only 1bp tighter during execution – although making it the tightest Dutch 10 year in over a decade. Its travails were partly attributed to difficult price discovery.

De Volksbank, formerly known as SNS Bank before a rebranding on 1 January, returned to the covered bond market last October after a lengthy absence, with a successful Eu500m 15 year issue. That deal was its first benchmark since August 2012, with the bank having focussed on other markets after being nationalised in 2013.

After announcing a mandate yesterday (Tuesday), de Volksbank leads Barclays, HSBC, Natixis and Rabobank launched the Eu500m no-grow issue with guidance of the 4bp over mid-swaps area. The spread was later fixed at 3bp on the back of Eu585m of orders.

Bankers away from the deal noted that the size of the book and the movement between initial guidance and re-offer were smaller than in most recent trades, with market dynamics generally considered highly supportive after recent undersupply.

“It seems that Volksbank had a hard time,” said a syndicate banker away from the leads. “Perhaps initial guidance of 4bp was a bit on the tight side, and the premium was in some peoples’ eyes not enough for a new 10 year from what is a pretty rare and formerly nationalised Dutch issuer.

“But in the end it was always going to be difficult to put a price tag to this one. This would have been one of the hurdles they had to overcome, and perhaps they were not able to overcome this in the best possible way.”

Bankers said it was difficult to estimate fair value for the deal because of the issuer’s lack of outstanding bonds, while other the covered bond curves of other Dutch issuers are particularly steep.

De Volksbank September 2020s were seen at minus 3bp, bid, and October 2031s at 16bp, but bankers said the bonds were relatively illiquid.

“Volksbank restarted their issuance with a 15 year in October, and their only other outstandings are an August 2017 issue – which will disappear soon – and a September 2020 issue, so it is hard to work out their curve, and your best option is to look at the curves of others,” said a syndicate banker away from the deal.

Noting that de Volksbank’s outstandings are quoted around 3bp back of ABN Amro’s curve, and seeing ABN Amro January 2026s at minus 10bp, bid, and April 2031s at plus 10bp, bankers estimated that de Volksbank’s new issue offered a premium of around 3bp.

The deal is only the third new benchmark covered bond from the Netherlands this year. The last was a Eu500m 10 year issue for Van Lanschot that was priced at 19bp on 8 February and seen trading at 15bp, bid, today. Bankers said Van Lanschot’s deal was not an appropriate comparable given the banks’ different profiles and that Van Lanschot issues in conditional pass-through format.

“I don’t think Van Lanschot is a good proxy,” said one. “But perhaps some investors had this kind of spread in mind.”

De Volksbank’s deal is the tightest 10 year covered bond benchmark from the Netherlands since ABN Amro sold a Eu1.5bn 10 year in February 2007.