A Eu750m seven year covered bond for Bank of New Zealand today (Thursday) attracted some Eu950m of demand, with the deal supported by a relative lack of New Zealand supply this year and by investors’ increasingly evident preference for paper in the belly of the curve.

The deal comes after the issuer completed a European roadshow marketing either a euro benchmark covered bond or senior unsecured transaction.

After announcing a mandate for a seven year benchmark covered bond yesterday (Wednesday) afternoon, BNZ International Funding Limited leads Commerzbank, Deutsche Bank, HSBC and National Australia Bank launched the deal with guidance of the 18bp over mid-swaps area this morning.

Guidance was revised to the 16bp area with books over Eu900m, before the spread was set at 15bp and the size at Eu750m (NZ$1.16bn), with books around Eu950m, including Eu27m joint lead manager interest.

“It’s a good result and a fairly textbook trade,” said a syndicate banker away from the leads. “It shows that the seven year is probably the market’s preferred maturity at the minute, as we have seen in recent weeks that order books have decreased further out the curve – apart from today’s other deal, for Nationwide.”

The new issue becomes the longest dated benchmark covered bond from New Zealand, extending the country’s curve by one year.

It was deemed to have offered a new issue premium of around 2bp, with bankers citing Westpac NZ April 2022s – the most recent New Zealand benchmark – at around 8bp, mid, and ASB October 2023s – the longest dated New Zealand benchmark outstanding – at around 10bp.

“To print with that kind of premium is a good result for this issuer,” said a syndicate banker away from the leads. “No doubt they will have been well supported by the lack of supply from New Zealand.”

The deal is only the second benchmark covered bond from New Zealand this year, following a Eu1bn five year issue for Westpac NZ on 30 March. BNZ’s last euro benchmark covered bond was a Eu750m five year in June 2016.