The Covered Bond Report

News, analysis, data

ING in strong comeback with EUR1.75bn 10 year

ING printed the largest single-tranche covered bond since January today (Thursday), a EUR1.75bn 10 year, upon a EUR2.35bn-plus book. Bankers said the deal, ING’s first benchmark since 2013, shows strong results are still possible despite a swing in power to investors. Nationwide sold a £1bn FRN.

The Dutch bank’s deal is the largest single-tranche benchmark covered bond since January, when ABN Amro priced a EUR2bn 15 year issue.

Following a mandate announcement yesterday morning, leads Credit Suisse, Danske Bank, DZ Bank, ING, LBBW and Natixis launched the deal this morning with guidance of the mid-swaps flat area. Around one hour and 10 minutes after the books opened, the leads announced that they had taken more than EUR1.5bn of orders.

The spread was subsequently set at minus 3bp with books “well above” EUR2bn, excluding joint lead manager interest. The size was later fixed at EUR1.75bn, with the final book over EUR2.35bn.

“EUR1.75bn, even if it is paying a technically generous premium, is quite some success for the issuer,” said a syndicate banker away from the leads. “In these times where the market is slightly moving backwards and it is becoming more of an investors’ market, it is not about the technical difference between fair value and the printing level.

“It is more about finding the level where you can print a deal successfully and give it a chance to perform on the secondary. We have seen that all the recent trades priced with more generous premiums are performing, even if only slightly, unlike the deals priced in February and March.”

Another syndicate banker agreed, noting that issuers can still secure historically attractive spreads and build sizeable deals despite concerns over the market’s direction, with ABN Amro having yesterday printed a EUR1.25bn 20 year issue at plus 8bp, 12bp tighter than it priced a 20 year in 2017 – even while offering a new issue premium of some 7bp.

“We have heard a lot about how the market isn’t great, and conditions are certainly volatile, but we have seen this week that issuers can still get really good deals on really good terms,” he said.

Bankers said demand for the deal was supported by the issuer’s rarity in the covered bond market and the strength of the ING name.

The new issue is ING Bank’s first benchmark covered bond since May 2013, although subsidiaries ING Belgium and ING-DiBa have since been active in the market, the former selling its last euro benchmark in 2015 and the latter in 2016.

A syndicate banker away from the leads noted that ING’s last benchmark predated the launch of the ECB’s third covered bond purchase programme.

“It is therefore not surprising that they decided to take advantage of the still-attractive market conditions and print at the long end,” he said.

Syndicate bankers saw ING May 2023s – the issuer’s longest-dated outstanding – at minus 17bp, mid, and said the final spread of minus 3bp offered a pick-up of 6bp-7bp over its extrapolated curve, seeing Rabobank May 2024s at minus 18bp and February 2028s at minus 10bp.

Syndicate bankers at the leads also cited as comparables ABN Amro January 2024s and January 2026s, both at minus 16bp.

Nationwide Building Society leads Credit Suisse, NatWest and RBC launched the UK issuer’s five year FRN with guidance of the high 20s over three month Libor area. The spread was later fixed at 26bp with books over £1.1bn, including £85m joint lead manager interest. The size was subsequently set at £1bn.

Bankers noted that spreads in the sterling covered bond market have widened slightly since the start of the year.

The new issue is the second five year FRN from a UK issuer, following a £1.25bn issue for Barclays on 2 January that was priced at 22bp over three month Libor. The last five year FRN was a £250m issue for Singapore’s Oversea-Chinese Banking Corporation, which was priced at 27bp on 7 March.

The deal is Nationwide’s first sizeable sterling covered bond since 2016, when it printed a £750m three year FRN. The building society sold two EUR1bn covered bonds last year, a seven year in March and a 15 year in June.