New Zealand’s ASB issued its tightest covered bond today (Monday), a Eu500m seven year issue that was priced at 10bp over mid-swaps on the back of Eu1.75bn of orders, with a pick-up of around 2bp deemed substantial enough to drum up strong demand in favourable market conditions.

ASB Finance Limited with Barclays and Commerzbank held a European roadshow last week to market a five to seven year deal.

A Eu500m no-grow seven year issue was launched this morning with guidance of the 14bp over mid-swaps area by leads Barclays, BNP Paribas, Commerzbank and ASB parent CBA. Guidance was revised to 10bp-12bp, will price within range, with books over Eu1.5bn, before the spread was set at 10bp. The final book stood at Eu1.75bn.

The deal is ASB’s tightest euro benchmark covered bond and the second tightest to be launched from the jurisdiction, behind only a Eu1bn five year issue for Westpac NZ that was priced at 7bp in March.

“It’s a good price, and a great book with great take-up and strong quality,” said a syndicate banker at one of the leads. “It shows that the market is in very good shape and if a deal offers just a little bit of a pick-up it goes very smoothly.”

Bankers at and away from the leads said the deal offered a new issue premium of around 2bp, based on the issuer’s secondary curve.

“It’s a fairly small concession and quite a strong book, especially if you look at how trades from New Zealand have gone historically,” said a syndicate banker away from the leads. “It probably helped that we’ve seen limited supply from the country.”

The new issue is only the third benchmark covered bond issued out of New Zealand this year, following a Eu1bn five year for Westpac NZ in March and a Eu750m seven year for BNZ in June. ASB’s last benchmark issue was a Eu500m seven year in October 2016.

ASB parent Commonwealth Bank of Australia (CBA) last issued a benchmark covered bond in April, a Eu750m seven year.