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NIBC proves more tempting in 10s as Axa builds curve

Axa Home Loan SFH and NIBC launched €500m no-grow 10 year trades today (Tuesday), and the Dutch issuer gained more traction, with its 20-plus spread helping attract over €1.1bn of demand, although a lead banker said the French issuer’s second benchmark would stand it in good stead.

NIBC imageNIBC leads ING, LBBW, NatWest, NIBC and NordLB went out this morning with guidance of the mid-swaps plus 25bp area for the €500m no-grow 10 year CPT covered bond and after around an hour and 40 minutes, guidance was revised to plus 22bp+/-1bp, will price in range, on the back of over €1bn of orders, excluding JLM interest. The spread was ultimately set at plus 21bp on the back of orders above €1.1bn, excluding JLM interest, pre-reconciliation.

A syndicate banker away from the leads said this was a strong result.

“In this kind of market, anything that has Dutch risk, is a 10 year, and comes out at 20-plus, that will get demand,” he added.

The deal offered a marginally positive yield, of 0.046%, but a syndicate banker at one of the leads played down the impact of this and agreed that the absolute spread paid by NIBC was the attraction and contributed to the issuer paying a “very minimal” new issue premium.

He put fair value around the 20bp area, citing the issuer’s September 2028s at plus 19bp, mid, and with a NN Bank €500m 10 year CPT priced at 20bp in September trading at 19bp.

“For a one year extension on their longest bond, it’s probably 20bp or even 21bp,” he said.

Two syndicate bankers away from the leads saw fair value a touch tighter, but agreed that the pricing was competitive, with one saying the execution strategy had helped.

“Starting at 25bp gave them enough momentum for the trade,” he said.

Axa Home Loan SFH approached the market this morning after a mandate announcement yesterday (Monday). Leads BNP Paribas, Crédit Agricole, ING and Natixis this morning went out with guidance of the mid-swaps plus 12bp area for the €500m no-grow 10 year obligations de financement de l’habitat benchmark. The spread was ultimately fixed at 9bp on the back of €835m of orders, including €65m joint lead manager interest.

“It’s not a blow-out,” said a syndicate banker away from the leads, “but if I look at fair value, it’s around 7bp-8bp, so with only 1bp-2bp new issue premium it’s probably fine.”

Another banker away from the leads said that recent oversupply of 10 year paper had likely reduced potential interest in the trade, while another suggested wider IPTs would have helped the deal gain more traction.

A lead syndicate banker said the new issue premium was in line with recent core issuance and that the execution strategy had worked well.

“It was a bit slower than NIBC,” he said, “but obviously it is a bit trickier in the French space, where spreads are really tight. But we didn’t have any pushback on IPTs and after the book update we gained momentum, and in the end it was fine.”

The deal is only Axa Home Loan SFH’s second benchmark, after a €1bn eight year in June.

“They need to expand their investor base and become a more frequent issuer, and this new issue will certainly help them in the future,” he said.