Rabobank launched its first euro benchmark in over a year and only the third from the Netherlands in 2020 today (Wednesday), a €1.25bn 10 year transaction that unlike some recent supply avoided drops during execution and also reflected a “more sober” market.

Following a mandate announcement this (Wednesday) morning, Rabobank leads BNP Paribas, Credit Suisse, Citi, Deutsche and Rabobank went out with guidance of the mid-swaps plus 10bp area for a 10 year euro benchmark-sized transaction. After an initial update reported books over €1.5bn, excluding JLM interest, the spread was ultimately set at 7bp. The size was later set at €1.25bn, on the back of over €1.6bn of demand good at re-offer.

A syndicate banker away from the leads said the deal reflected the “old new normal” of moderate oversubscription levels, limited to zero new issue premiums, and re-offer spreads returned to pre-Covid levels.

“It’s a big size given the book,” he added, “but it worked, so, nice one!”

The banker said it was positive that, unlike a €1bn five year transaction from Caffil last week, the book size did not fall once the issuer set the final spread. And he said that although order books have not grown as rapidly in the past two weeks, this is merely a reflection of covered bonds being one of the “more sober” parts of the market.

A lead banker also highlighted the lack of drops during execution, and described the process as “textbook” and broadly in line with recent trends.

Rabobank’s issue is only the third Dutch euro benchmark this year, following a €2bn 15 year transaction from ABN Amro on 7 January and a €500m five year conditional pass-through from Achmea on 9 June. The lead banker said the relative scarcity of Dutch paper helped.

“Rabo has a very regular investor base, so the accounts involved were very much as expected” she added, “and this is their first time in the market since June 2019.”

The Dutch issuer’s last euro benchmark covered bond was a €2bn eight and 20 year deal on 13 June 2019.

The lead banker put the new issue premium at 1bp-2bp.

“Everything between its 2028s and 2032s were trading between 4.5bp and 5.5bp,” she said, “and obviously you have to take the levels at the moment with a pinch of salt, but I’d say it’s 5bp-6bp over mid-swaps.”

Another syndicate banker away from the leads put fair value at 5bp. He said that although it was a respectable trade, the 10 year maturity was the not most favourable because Dutch covered bonds have begun to look rich against Dutch agencies.

“It’s almost flat to the agencies,” he added, “and we’re still in negative re-offer territory, so they may have had some resistance there.”

He suggested a seven year would have been stronger, but a longer maturity likely fitted the issuer’s needs, with Dutch cover pool assets tending to be longer-dated.

“It is one of those names that can do whatever it wants,” he added. “It’s not a blow-out, but this was to be expected as the market is a bit out of juice right now.”