Bank of Queensland attracted more than EUR1.2bn of orders to its second euro benchmark covered bond today (Thursday), a EUR500m five year conditional pass-through, despite market conditions being softer and the audience for the CPT issue being more constrained than for typical supply.

The mandate for the Australian deal was announced two weeks ago and in the interim broad market conditions have deteriorated.

“The market is increasingly nervous in overall sentiment,” said a syndicate banker at one of BOQ’s leads, “although that is affecting more senior and higher beta than covered bonds. The political landscape is not getting easier – we have the European elections on Sunday.

“There has meanwhile been a lot of supply, and the market would probably be a bit relieved to see a couple of quiet days.”

He said that although the impact of that weakness on covered bonds has been limited, a three day roadshow this week ahead of launch proved to be more valuable than anticipated.

“The preparation has been proven successful,” he said, “even if this was never in doubt.”

Leads BNP Paribas, Commerzbank, ING, NAB and UBS went out with guidance of the 30bp over mid-swaps area for the EUR500m (A$811m) no-grow five year deal and ultimately priced it at 25bp over on the back of more than EUR1.2bn of orders.

The lead syndicate banker put fair value in the context of 22bp-23bp over, based on Bank of Queensland’s only previous issue, a July 2022, being quoted at 16bp over, and looking at the appropriate pick-up to be expected of the CPT versus Australian non-CPT covered bonds. Other bankers put fair value closer to the 25bp re-offer.

A banker away from the leads said the trade went a little slower than much recent issuance, attributing this to the more limited investor base for such an Australian CPT, and the lead syndicate banker acknowledged this, saying it was “one for the pros”.

He added that the book was nicely diversified, but with a couple of particularly large orders, while demand came from asset managers and fund managers rather than the LCR bid notable on many recent trades.

Final book statistics were still being prepared this afternoon, but he said that German accounts took approximately 60% of the deal, the Nordics 10%, the UK 10%, the Benelux 10% and France 5%.

Bank of Queensland’s only previous euro benchmark covered bond was also a EUR500m five year issue priced at 25bp over mid-swaps, in June 2017, which attracted orders above EUR900m.