Westpac New Zealand kicked off H2 euro benchmark covered bond issuance today (Thursday) with a €750m three-and-a-half year trade that bankers said comfortably exceeded the €500m minimum thanks to the spread being set from the outset and, like recent supply, incorporating a chunky NIP.

The last euro benchmark covered bond was a €750m trade for Raiffeisenlandesbank Niederösterreich-Wien on Tuesday of last week (28 June), with issuance across asset classes having been deterred by poor conditions in the interim.

“The market is just extremely volatile, one way or another,” said a syndicate banker. “Tuesday was horrible, then yesterday (Wednesday) was quite good – it really is not enticing investors at the moment. It’s just too volatile for them to make up their minds on what’s to come, and then we get closer to the next US CPI, to the Fed, to the ECB – and in mid-July everyone’s going to be on vacation.

“But today we have like a really good day – equities are up, credit indices are tighter, secondaries are tighter, even if that’s more on the rest of the capital structure.”

Westpac Securities NZ Ltd (acting through its London branch) entered the market at short notice, with a mandate announcement this morning.

Leads BNP Paribas, HSBC, JP Morgan and Westpac opened books with guidance of mid-swaps plus 30bp “the number” for the euro benchmark-sized January 2026 covered bond, expected ratings Aaa/AAA (Moody’s/Fitch). After around an hour and 10 minutes, they reported books above €500m, excluding joint lead manager interest, and after around two hours and 20 minutes, the size was set at €750m (NZ$1.24bn) on the back of books above €925m, including €50m of JLM interest. The final book was above €1bn, including €75m of JLM interest.

A lead banker said the strategy of setting the spread from the outset was integral to a successful outcome.

“Investors really have a tangible trade to consider,” he said. “There is no optionality about it – just take it or leave it. I think they appreciated that, because the book built at a decent pace.

“The three-and-a-half year maturity makes it a short, defensive cash-parker,” he added, “and the execution strategy coupled with the tenor helped ensure strong execution against a market that has otherwise been slow.”

Syndicate bankers away from the leads agreed that the “very pragmatic” execution strategy had helped the issuer “comfortably” achieve the €750m size.

“It clearly indicates that things are still challenging,” added one.

They also flagged the spread on offer as reflective of market developments, noting the three-and-a-half year issue was priced 2bp wider than a €750m five year for compatriot Bank of New Zealand on 21 June. A banker away from the leads saw fair value at 17bp-18bp over, based on Westpac NZ June 2028s at around 24bp, although the lead banker put the new issue premium at 7bp-8bp over – he saw BNZ’s recent five year at 27bp.

Another syndicate banker away from the leads who had been surprised to see BNZ enter the market said that, either way, the euro covered bond was an interesting option versus other instruments and currencies.

“If they look at this from an all-in cost perspective,” he added, “in the end it was still super-attractive for them, and this might have been the driver.”

The only announced euro benchmark mandate in the pipeline is for Korea Housing Finance Corporation (KHFC). The issuer is holding investor calls from yesterday to tomorrow (Friday) ahead of a planned four year social covered bond expected at the start of next week via BNP Paribas, Citi, HSBC, ING and Standard Chartered.