Danske Bank achieved its tightest ever euro spread with its joint-longest benchmark today (Tuesday), pricing a Eu500m 10 year covered bond at minus 5bp, in line with recent Swedish supply and with just 1bp of new issue premium, on the back of a Eu1.2bn book.

The new issue is Danske’s first euro benchmark covered bond in the 10 year part of the curve since 2009, and only one has been issued since, a Eu750m 10 year issue for BRFkredit in October 2016. A syndicate banker at one of Danske’s leads – ABN Amro, Danske, Natixis, NatWest Markets and UniCredit – said the issuer had been encouraged to tap the maturity by recent 10 year supply from Sweden, where such long dated issuance is also rare.

“Although such long dated supply is rare, this deal did not come entirely out of the blue, following some well-received 10 year transactions from Sweden, especially last week’s Eu750m issue for SEB,” he said. “That gave Danske comfort, even though this new issue extends their curve by around five years.”

The Eu500m no-grow deal, launched out of Danske’s C cover pool, was launched with guidance of the mid-swaps minus 1bp area this morning.

The leads later announced that books were above Eu950m, including Eu85m joint lead manager interest, and subsequently revised guidance to the minus 4bp area, plus or minus 1bp will price within range, with books above Eu1.1bn, including Eu85m JLM interest. The spread was ultimately fixed at minus 5bp on the back of Eu1.2bn of demand.

The deal is the tightest Danish euro benchmark covered bond to date, coming well inside the previous record spread of minus 2bp, at which Danske has printed three euro benchmarks – the last a Eu1bn five year issue in February.

“Doing your longest deal at your lowest spread speaks for itself,” said the lead syndicate banker. “It is an amazing result.”

Syndicate bankers said it was difficult to calculate fair value for the new issue given a lack of Danish comparables with maturities of more than seven years. Danske June 2022s, the issuer’s longest dated outstanding euro benchmark, were seen at around minus 15bp, mid. BRFkredit October 2026s were seen at around minus 3bp, but bankers noted that Danske trades well inside its compatriot at the shorter end.

A syndicate banker at one of the leads said the most appropriate comparable was SEB’s Eu750m November 2027s, which were also priced at minus 5bp last Tuesday and seen at around minus 7bp, mid, today. He noted that SEB trades around 1bp tighter than Danske at the shorter end, implying that the new issue offered a premium of around 1bp.

“Given that there are almost no long dated Danish covereds outstanding, and that this issue is only Eu500m, there should also be good potential for outperformance, at least versus other recent 10 year trades,” said a syndicate banker.