The Covered Bond Report

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NN Bank EUR500m 10s pricing pips NIBC

NN Bank was today (Tuesday) able to price a EUR500m 10 year CPT covered bond 1bp inside the re-offer spread of a recent equivalent trade from compatriot NIBC, while still attracting some EUR900m of orders.

Following a mandate announcement yesterday (Monday), Nationale-Nederlanden Bank (NN Bank) leads ABN Amro, ING, LBBW, Natixis and SG launched the EUR500m no-grow 10 year conditional pass-through (CPT) issue with guidance of the 17bp over mid-swaps area this morning.

After around one hour and 35 minutes, the leads announced that books were above EUR700m. Some 40 minutes later, guidance was revised to the 15bp area, plus or minus 1bp will price within range, with books over EUR800m. The spread was subsequently set at 14bp with the book closing at around EUR900m pre-reconciliation, including EUR15m joint lead manager interest.

The deal is the second 10 year euro benchmark covered bond from the Netherlands this month, following a EUR500m CPT issue for NIBC on 4 September. The NIBC September 2028s were priced at 15bp upon a final book of over EUR800m, including EUR15m JLM interest, and seen at 14bp, mid, before NN’s deal was announced.

“NN Bank is better rated and a slightly better credit than NIBC so we were looking for a tighter print,” said a syndicate banker at one of the leads. “The market is what it is and investors have more pricing power now, so we thought the prudent thing to do was start at the 17bp area – the same starting point as NIBC.

“We then had a slightly stronger start in the book and later carefully worked through the sensitivity and priced at 14bp, which makes sense. Probably in another, less busy market we would have been able to price at 13bp, but there is a lot going on across the whole financial market.”

NN Bank is rated A/A- (S&P/Fitch) whereas NIBC is rated BBB/BBB (S&P/Fitch). NIBC is a more established covered bond issuer, with seven euro benchmark covered bonds to its name.

Bankers noted the final spread offers a substantial pick-up versus outstanding 10 year soft bullet issues from some more established Dutch issuers, of up to 19bp versus ING April 2028s.

The deal is NN Bank’s third benchmark covered bond, following an inaugural EUR500m seven year issue in October 2017 and a EUR500m long seven year in June, and extends its curve by three years.