HSBC Bank UK issued an inaugural euro benchmark yesterday (Wednesday), biding its time after a mandate announcement on Monday to issue a €750m five year on the back of some €2.4bn of demand, in the first UK euro benchmark since concerns around third country equivalence were reignited.

Leads BMO, CIBC, Crédit Agricole, HSBC, ING, Natixis, Rabobank, Santander and UniCredit opened books yesterday morning with guidance of the mid-swaps plus 50bp area for a May 2030 transaction, expected ratings Aaa/AAA (Moody’s/Fitch), officially announced as a euro benchmark but with the banks guiding for a €750m size.

After around two-and-a-quarter hours, they reported books above €2.1bn, including €150m of joint lead manager interest, and around an hour later they set the spread at 43bp and the size at €750m (£631m) on the back of more than €2.3bn of orders. The final book was above €2.4bn, with €150m of JLM interest.

The €2.4bn-plus book was the biggest of seven euro benchmarks this week, with its oversubscription ratio only topped by a €500m 20 year for Deutsche Kreditbank on Tuesday that attracted €1.9bn-plus of interest. The UK and German trades also achieved new issue premiums that the leads put at zero.

HSBC’s mandate had been announced on Monday morning, when two euro benchmarks – a €750m 5.5 year for Crédit Agricole Public Sector SCF and a €750m five year for SR-Boligkreditt – were already in the market, and four further benchmarks plus a sub-benchmark hit the market on Tuesday.

A syndicate banker at one of HSBC’s leads said that while it could have proceeded on Tuesday, it was aware of the heavy supply and, after a go/no-go call relatively late, was happy to wait until yesterday, when the market was expected to be clear.

“We got a thank you from a fair number of institutional investors for not creating more work for them on a busy day,” he said. “We were then pretty much the sole focus of the market yesterday.”

The extra day also gave the issuer more time to market its debut, and for investors to ensure credit lines were ready and to provide feedback.

“With any new name, whether you’re HSBC or a Mongolian bank, a marketing process is required,” said the lead banker, noting that previous HSBC-tagged euro issuance had been from Canadian and French entities that have since been sold.

But as well as the usual debut questions, the issuer had to tackle the issue of reopening the UK euro covered bond market after a period of uncertainty.

The last euro benchmark from the UK was a €750m seven year for Nationwide Building Society priced at mid-swaps plus 49bp on 17 March. Since then, the UK Prudential Regulation Authority (PRA) in early April moved to generally exclude non-UK covered bonds from UK financial institutions’ LCRs, and although the move was paused, it sparked fears that UK covered bonds could face similar action in the EU, with the European Banking Authority due to make recommendations on the topic to the European Commission this summer.

A number of core Eurozone bank treasuries indicated they would likely not participate in non-Eurozone trades, said the lead banker, but the issuer could rely on real money accounts as well as central banks and official institutions, with the five year maturity helping the latter, in particular.

Another lead banker noted that the €2.4bn-plus book (with €150m of JLM interest) compared favourably to, for example, the €1.35bn-plus book (with €155m of JLM interest) of a DNB Boligkreditt five year at 33bp on Tuesday, “with all the PRA and EBA noise”.

On the basis of investor feedback, guidance was set at the 50bp area, which was at the wide end of what had been envisaged, according to the first lead banker, although the issuer was then able to tighten in 7bp to 43bp, and the trade closed at 42bp/40bp yesterday.

He said the final level balanced, on the one hand, the responsibility of the issuer to reopen the UK market successfully after the regulatory episode as well as setting a firm foundation for future HSBC issuance, while on the other hand finding the correct level for the HSBC name and an issuer that will not be the biggest issuer of euro benchmarks going forward. While a 44bp re-offer spread was considered and the ultimate pricing led to some drops, further investors came in when final terms were set and the book grew incrementally, added the lead banker.

The 43bp spread compared with 41bp for a €1.5bn five year Westpac issue that was priced at 43bp on 7 May, while Nationwide and Santander UK 2032 paper issued earlier this year was seen at around 51bp.