NN Bank is set to end a two week hiatus in euro benchmark supply with the launch of the first Dutch issue of the year tomorrow (Tuesday), a €500m no-grow 20 year soft bullet that is expected to benefit from a recent back-up in yields, although the broader supply outlook remains dim.

The new issue will constitute the first Dutch supply since a €1bn 20 year Rabobank trade on 19 November, and the first euro benchmark in just over two weeks, since Caffil issued a €750m 15 year on 8 February.

The mandate for the Nationale-Nederlanden Bank NV (NN Bank) issue was announced this morning, with ABN Amro, Credit Suisse, Rabobank, Société Générale and UniCredit as leads.

NN Bank most recently launched a €250m 20 year deal in November, while its last benchmark was a €500m 15 year in September.

A lead banker said that extending duration in line with the Dutch residential mortgage market was a partial reason behind NN Bank’s switch to soft bullet issuance from a conditional pass-through programme last year.

“It’s therefore no surprise they’ve done 10s, 15s and are now doing a 20 year in benchmark format,” he said, “continuing with the journey of building their curve out from their soft bullet structure.”

The recent back-up in rates is also helpful to the new issue, he added.

“Not long ago 20 year rates were close to zero,” he said. “Now they’re in the 37bp-38bp context, so that’s very helpful.

“Its 20 year sub-benchmark in November priced with a yield of less than 10bp,” he added, “so this is going to offer around five times that.”

A banker away from the leads said that in light of such ALM and yield considerations, it was not surprising to see a long-dated Dutch mandate emerge.

“I’m sure it will fly,” he said.

Citing NN Bank September 2035 soft bullets trading around flat to mid-swaps, another banker away from the leads said the new issue could be expected to be priced at 1bp-2bp.

“Let’s assume it’s one or two basis points for curve,” he said. “They don’t need a NIP, so they could start at around 6bp-5bp and bring it down to 1bp.”

The first banker away from the leads said the new issue could land flat to mid-swaps, but that 1bp-2bp was more realistic.

“Even though it’s not the market leader in the Netherlands,” he said, “it ticks all the boxes and I would expect a relatively tight print.”

According to pre-announcement comparables circulated by the leads, de Volksbank 2040s were quoted at minus 1.3bp, bid, and ABN Amro 2039s and Rabobank 2040s at minus 2bp, with their curves from around 10 to around 20 years ranging from minus 0.8bp for de Volksbank to plus 1.5bp for ABN Amro. The last new euro benchmark in the 20 year part of the curve, a €500m October 2039 mortgage Pfandbrief from MünchenerHyp on 15 January, was quoted at minus 3.4bp.

Any deal tomorrow will be only the third euro benchmark of the month and syndicate bankers said no other covered bond mandates are likely this week, with activity expected to remain limited for the foreseeable future.

“With the facilities everybody has access to, covereds aren’t obvious for everyone,” said one, “so I don’t think we’re going to see a mad rush of supply.”