Aegon sold the first euro benchmark in almost two weeks today (Monday), a €500m five year CPT that drew over €2.2bn of orders in a market riding high on the back of Joe Biden’s victory, with subsequent reports of a promising Covid-19 vaccine only boosting sentiment further.

Announcing the mandate this (Monday) morning, Aegon Bank leads ABN Amro, BNP Paribas, HSBC, Rabobank and Société Générale went out with guidance of the mid-swaps plus 15bp area for a €500m no-grow five year conditional pass-through transaction. After around an hour and five minutes, books were reported as being over €1.25bn, and after around two hours and 10 minutes, the guidance was revised to 11bp+/-1bp, WPIR, on the back of over €2.25bn of demand. The deal was ultimately priced at 10bp, on the back of over €2.2bn of demand.

Today’s trade is the first new euro benchmark covered bond since MünchenerHyp launched a €500m no-grow 20 year on 27 October, and Aegon’s first euro benchmark covered bond in almost three years, the Dutch issuer’s last issue having been a €500m seven year in November 2017.

A syndicate banker away from the leads said the deal represented a strong return to the primary market for Aegon, while also illustrating the unfaltering robustness of the covered bond segment.

“As usual, it sells like hot cakes,” he said, “but if anyone is surprised, please raise your hand.”

The trade was timed “fantastically”, according to another banker away from the leads, who said the five year maturity and attractive, double-digit spread proved a desirable combination, even if the CPT bond is not eligible for Eurosystem purchases.

“No issuer at the moment is really relying on the ECB purchases programme,” he said, “so it doesn’t really matter, and at that spread, everyone and their brother has just jumped at it. Where else can you get a five year at that level?”

A lead banker said considering the infrequency of Aegon, it would in more normal times probably given advance notice of a new issue to allow investors to refresh lines, but given prevailing undersupply dynamics, the intra-day process did not hit demand.

“The market is so bereft of any supply that you don’t necessarily need, as an issuer, to be taking any undue overnight market risk,” he said.

The over four times subscribed book and pricing up to 1bp through fair value are healthy signs for the covered bond market, according to the lead banker.

“All of those metrics feel like it’s a pretty good time to be an issuer looking at the market right now.”

The deal was priced with zero to negative 1bp of new issue premium, according to syndicate bankers at and away from the leads, who said while fair value was difficult to place given Aegon’s illiquid curve, it was around 10bp-11bp. According to pre-announcement comparables circulated by the leads, its November 2024s and June 2027s were at 9bp and 13.5bp over mid-swaps, respectively.

“Between 9bp and 13bp, the average would be 11bp,” said a banker away from the leads, “so 10bp is probably slightly through fair value.”

The lead banker said it was priced flat to fair value based on Aegon’s curve.

“Their curve is trading at roughly 1bp a year or so,” he said, “so that’s 10bp fair value, which is pretty good.”

Another syndicate banker said the broader market is “on fire” following confirmation of the US presidential election outcome at the weekend, and especially after reports emerged today of a Pfizer/BioNTech Covid-19 vaccine with a 90% effectiveness rate.

“This news today is what the market has been waiting for,” he said, “and, if indeed this vaccine is successful, this is obviously a game-changer.”

Markets opened positively this morning but turned exuberant after the vaccine announcement, according to another banker, noting European stocks were up as much as 7%.

“There is a very strong conviction at the moment that not only do investors have a lot of cash,” he said, “but that they want to get involved in the market while it’s there.”

A pipeline is building across asset classes, he added, and further covered bond issuance therefore would not be unexpected this week.

“For those who are looking, today was very convincing,” he said, “so maybe wait a day or two and then get it done.”