Bank of Nova Scotia issued the biggest single-tranche covered bond in six months and the largest such non-Eurozone issue of the year today (Tuesday), a EUR1.75bn five year that drew some EUR2.2bn of demand at a lower premium than recent deals. HSH Nordbank is due with a Pfandbrief.

The EUR1.75bn (C$2.63bn, US$2.03bn) deal is the largest single-tranche benchmark covered bond since a similarly-sized 10 year deal for ING Bank on 5 April, and only topped this year by a EUR2bn 15 year issue for ABN Amro on the second business day of the year.

Leads BNP Paribas, HSBC, NordLB, Scotiabank and UBS went out with guidance of the mid-swaps plus 9bp area this morning and on the back of EUR1.9bn of demand were able to move straight to the final pricing of 6bp, with EUR2.2bn of demand allocable at the re-offer.

“Plus 9bp – which implied a starting NIP of 6bp – got a pretty speedy investor response,” said a covered bond banker at one of the leads. “With the book of EUR1.9bn, going to mid-swaps plus 6bp, the number, and then solving for size was much cleaner than turning this into a multi-step process.”

He put the ultimate new issue premium at 3bp, “a decent result”. It compares with new issue premiums of around 5bp-7bp paid by SR-Boligkreditt, ING-DiBa and Berlin Hyp on seven year benchmarks so far this month (the only other issue in October having been a ING-DiBa 15 year).

“Bank of Nova Scotia has achieved everything they set out to do, which was to diversify into euros ahead of the market moving wider,” said the banker. “They decided to come to market to take advantage of the covered bond product in a market that is a little bit wobbly, but also in the belief that with the end of the ECB purchase programme spreads are only going one way – that being wider – so why not dive into the market now.

“The level of demand they got is a testament to the Canadian covered bond product and to the Bank of Nova Scotia name,” he added. “And I think they’ve probably also benefited from the fact the covered bond market has been pretty quiet.”

BNS’s deal comes the day after Royal Bank of Canada sold a $1.7bn covered bond and was followed today by TD.

HSH Nordbank is expected to hit the market soon, with a mandate for a EUR500m no-grow three and a half year mortgage Pfandbrief announced this afternoon. Crédit Agricole, Commerzbank, Goldman Sachs, HSN Nordbank and Natixis have the mandate.