ABN Amro increased by Eu1.25bn a Eu1bn 20 year covered bond today (Wednesday), capitalising on heightened demand at the long end after a rise in yields to price the deal with a “remarkably” slim new issue premium and print what is believed to be one of the largest ever taps in the euro market.

The January 2037s started out as a Eu250m trade, issued as part of a dual-tranche offering in January at 20bp over mid-swaps, before being tapped by Eu750m on 17 March at the same spread.

Leads ABN Amro, Crédit Agricole and LBBW reopened the deal this morning with guidance of the 20bp over mid-swaps area. After 35 minutes, orders had exceeded Eu1bn. The spread was later fixed at 17bp on the back of over Eu1.5bn of orders, before the size was set at Eu1.25bn. The book closed at around Eu1.65bn.

The deal is understood to be one of the largest ever taps of a euro covered bond.

“It’s a very pleasing result,” said a syndicate banker at one of the leads. “I can’t recall a tap of this size for a long time, and there certainly hasn’t been one during the reign of CBPP3.”

Bankers have noted that demand for such long dated paper has increased following a rise in yields last week, and the lead syndicate banker said they had decided to push ahead with ABN Amro’s deal after observing a Eu6bn dual-tranche issue for the European Financial Stability Facility (EFSF) yesterday (Tuesday), in which a Eu3.5bn 31 year tranche attracted almost twice the demand of an Eu2.5bn eight year tranche.

“The issuer has seen strong mortgage production, and so has had a need for long-dated covered bond funding,” he said. “With that in mind, we have been looking for a decent window to get this done, and today provided a very appropriate window for reopening a longer dated deal, against a firm backdrop.”

Bankers at the leads said there was little price sensitivity in the book, and said most investors participating were more focussed on the re-offer yield than the spread. The deal was ultimately priced with a yield of 1.658%.

It was deemed to have offered 2bp premium, with the bond trading at around 15bp, mid, pre-announcement. The tap was priced flat to the bid level.

“Even if you use mids rather than bids, that is a remarkably low new issue premium for such a long dated deal,” said a banker away from the leads. “Given the pricing that is achievable and the demand that is clearly out there, I would not be surprised to see more of these long end exercises.”

The syndicate banker at one of ABN Amro’s leads agreed.

“There are no real signs of fatigue despite all the tapering discussion and rates volatility,” he added. “All the recent covered bond trades have found good demand, so I am a very happy camper today.”

The tap comes after a Eu500m 10 year covered bond for Crédit Agricole also found strong demand on Monday, the long dated deal attracting over Eu1bn of orders.