KBC benefitted from its own scarcity value and a lack of other Belgian supply to build strong momentum for a Eu500m 10 year mortgage Pandbrieven today (Tuesday), attracting over Eu1.35bn of orders and pricing the deal 5bp inside initial guidance to land flat to recent French 10 year supply.

The new issue is KBC Bank’s first benchmark covered bond since February 2016, when it sold a Eu1.25bn long six year, and only the second benchmark Pandbrieven this year, following a Eu500m long seven year for BNP Paribas Fortis in March.

“There was no pre-marketing and we opened books straightaway this morning because we knew that this is a credit that can easily be absorbed by investors, especially with the size limited at Eu500m,” said a syndicate banker at one of leads BNP Paribas, DZ, ING, KBC and LBBW. “We have seen quite a lot of 10 year trades recently, but we were convinced there was room for another, certainly from a rare, high quality name like KBC.”

The Eu500m no-grow deal was launched with guidance of the mid-swaps minus 1bp area. After around one hour and 50 minutes, guidance was revised to the minus 5bp area, plus or minus 1bp will price within range, with books over Eu1.35bn. The spread was ultimately set at minus 6bp.

“It’s a very good result,” said a syndicate banker at one of the leads. “For investors, it’s always good to build up exposure to such a rare name, and that paid off for the issuer today.”

Bankers said it was difficult to calculate fair value for the new issue, as it extends KBC’s curve by four years. KBC September 2022s were seen at minus 17bp, mid, and January 2023s – its longest dated outstanding – at minus 16bp. Based on the curves of other Belgian issuers, fair value for the new issue was seen at around minus 2bp.

Bankers noted the deal was priced roughly in line with 2027 paper from French issuers Crédit Agricole, CM-CIC, La Banque Postale and SG, all seen at minus 7bp-6bp, mid, but with an attractive pick-up versus ABN Amro January 2026s, seen at minus 17bp.

Having previously had a more regular presence in the covered bond market, the KBC Group has in recent years focused on HoldCo senior issuance, said a syndicate banker at one of the leads. The KBC Group has issued two HoldCo senior benchmarks this year, a Eu1.25bn five year issue in February and a Eu750m 5.5 year FRN in May.