ABN Amro launched its first benchmark covered bond since July 2012 yesterday (Thursday) as receding fears about action in Syria opened an issuance window, with the Dutch bank also wanting to avoid potential upcoming disruptions, said an official at the issuer.

The deal is one of two benchmark covered bonds priced this week, with a Eu1bn five year deal for Australia’s ANZ Banking Group from Tuesday the other.

A syndicate banker said that covered bond deals this week started to pay new issue concessions “to accommodate the elements of event risk, post-summer supply, tight valuation and the fact that not all real money clients are willing to turn up for all trades”.

The market was quiet today – “a nice sleepy Friday,” said a syndicate official – but there is plenty in the covered bond pipeline. Norway’s Sparebanken Vest Boligkreditt will wrap up a roadshow next week and could then launch a deal in what is said to likely be the five to seven year maturity range, while La Banque Postale SFH could make its debut next week. A seven year maturity has been mentioned in connection with the trade.

ABN Amro made its move amid more relaxed market conditions that came after a difficult session on Wednesday, when markets were unnerved by apparent increasing determination among some foreign nations to take military action in Syria. A syndicate official on the deal said that sentiment had improved sharply from Wednesday to Thursday.

“It’s amazing how fickle the market was,” he said. “On Wednesday the market was pretty horrible, but then it closed reasonably steady in the US. When we came in this morning it was steady and it has been getting better as the day has gone on.”

Daniëlle Boerendans, head of secured funding at ABN Amro, said that the issuer was keen to take advantage of the better conditions given that the direct threat of military intervention in Syria had receded, and that it also wanted to avoid disruptions in the form of competing supply, a covered bond industry conference in Barcelona in the middle of September, and German elections (on 22 September).

“We decided to use the window and the deal turned out to be a success,” she said.

A syndicate official away from the leads said that ABN Amro’s and other issuers’ moves this week look wise given that headline risks such as Syria, German elections and FOMC meetings could result in a “window market” in September.

“Given how busy the pipeline looks, issuers will be willing to take advantage of every bout of stability to get deals done and lock in year-end funding when they can,” he said.

Daniëlle Boerendans, ABN Amro

Another syndicate banker said that the issuer had picked the right day of the week, but that there hadn’t necessarily been a need to rush and better market conditions will arguably be available after the next set of US non-farm payrolls are released, with “rates probably captive” and any tapering likely to be gradual.

ABN Amro’s deal is only the second euro benchmark covered bond from a Dutch issuer this year, coming on top of a Eu1.25bn 10 year for ING Bank in May. A syndicate banker said that the lack of Dutch supply has been notable, although not necessarily out of line with the general trend in the covered bond market.

Boerendans said that the issuer was focussed on the senior unsecured market in the first half of the year, launching three issues in total in euros and dollars, and thereafter felt it was time to turn to the covered bond market. ABN Amro published half year results last Friday (23 August), with a blackout in the lead-up to the results preventing the issuer from making a move around that time, she added.

Leads ABN Amro, Barclays, BNP Paribas, Deutsche Bank and UniCredit went out with initial price thoughts of the 40bp over mid-swaps area for a 10 year deal, and ended up pricing a Eu1.5bn deal at 37bp over, with guidance having been set at the 38bp over area.

More than Eu2.5bn of orders were placed for the deal via around 130 accounts, according to Boerendans.

A syndicate banker away from the leads had said that the 40bp over area seemed a generous starting point, but Boerendans said that the issuer had employed a defensive strategy.

“We wanted to get good traction, and the four handle was seen as providing that,” she said. “Our focus was more on pricing than size, but we are very happy with a Eu1.5bn trade, where we also managed to tighten the spread, and there should be enough room for the deal to perform.

“There was big Dutch participation, which surprised me given the smaller participation in our earlier trades, but it’s a good sign,” she added, “and there were also some accounts that hadn’t been active for a while and placed large orders.”

Germany took 30%, the Benelux 20%, Nordics 16%, the UK and Ireland 10%, Switzerland and Austria 9%, southern Europe 7%, France 7%, and others 1%.

Funds were allocated 31%, banks 28%, central banks 18%, pension funds and insurance companies 15%, corporates 4%, and others 4%. (Statistics by type corrected.)

A lead syndicate banker said the deal was quoted 1bp tighter on the bid today (Friday).