ING Belgium and Germany’s Helaba notched up Eu1.75bn of December benchmark covered bond supply between them today (Tuesday), with ING making a “terrific” debut and Helaba raising Eu750m at sub-Euribor levels. CBA tapped the US market yesterday.

ING Belgium HQ, Brussels

ING Belgium’s inaugural transaction had been expected, after the issuer on Thursday finished a roadshow and on Friday communicated it was leaning toward a five year maturity.

The Belgian issuer’s deal leaves only one mandate in the public pipeline, for National Bank of Canada. NBC went on a roadshow in early November and will resume some marketing on Thursday after it reports fourth quarter results tomorrow (Wednesday). The marketing is taking place in London, including on Friday, but market conditions will have to be very good for the issuer to proceed with a deal in December, according to a syndicate banker at one of the leads – BNP Paribas, Commerzbank, NBC and RBS.

ING Belgium leads Barclays, BayernLB, ING, Société Générale and UniCredit built an order book of around Eu2.3bn for the five year mortgage-backed deal, and will price a Eu1bn issue at 10bp over mid-swaps, the tight end of guidance of 10bp-12bp over. Initial price thoughts were in the low teens.

Around 118 accounts participated.

A syndicate banker at one of the leads said that the issuer met with a “terrific” reception, noting as a point of interest from a relative value perspective that ING was in the market at the same time as triple-A rated Microsoft, which was offering an eight year bond at 50bp-55bp over as part of dual tranche transaction.

ING Belgium is the third Belgian covered bond issuer, after Belfius and KBC, and the highest rated of the three – A2 by Moody’s, A+ by Fitch and A by Standard & Poor’s. S&P cut the issuer from A+ yesterday alongside its parent, ING Bank, after downgrading the Netherlands to AA+ on Friday. ING Belgium’s covered bonds are rated triple-A by Fitch and Moody’s.

Another syndicate banker on the deal said that the issuer paid a small premium for the inaugural status of the transaction. He put Belfius and KBC 2017s at 3bp and 2bp on a z-spread bid basis, and 2020s at 17bp over and 18bp over, respectively.

Belgian government bonds are trading at around 6bp over in the 2018 maturity, he added.

Syndicate bankers away from the transaction said that the issuer paid a small pick-up versus its theoretical curve, with one putting fair value at 7bp-8bp over, and that the transaction was encouraging.

“The secondary market has been a bit heavy so it’s good to see a deal getting printed,” said one.

Another said he was positively surprised by the reception for ING’s deal given the issuer name and the late year timing. It showed the difference a bit of spread can make for investor appetite, he added, contrasting ING’s deal with the sub-Euribor pricing for the Helaba transaction.

Helaba gets sub-Euribor Eu750m

Helaba has priced a Eu750m mortgage Pfandbrief at 5bp through mid-swaps on the back of more than Eu800m of orders, the vast majority from German accounts, according to a syndicate official at one of the leads – BNP Paribas, Crédit Agricole, Credit Suisse, Deutsche Bank and Helaba.

They began marketing the transaction yesterday (Monday) afternoon with initial price thoughts of the minus mid-single digits before opening order books with official guidance of the 5bp through mid-swaps area this morning. The order book stood at around Eu600m shortly thereafter before surpassing Eu800m.

A syndicate banker at one of the leads said the deal size was a positive. Putting a number on the new issue premium is tricky, he added, with trading levels not necessarily that realistic.

“The curve is so flat and so tight,” he said. “In Pfandbriefe everything is pricing between minus 15bp and minus 5bp.”

Issuers will want to hug their secondary market curve while investors are arguing that secondary levels are squeezed, he added.

Another syndicate banker away from the leads had put the new issue premium at around 5bp, saying that comparables were not very liquid and that there was some uncertainty about how a deal would fare this late in the year.

The issuer has comparable outstanding issuance marked in the minus low to mid-teens, according to bankers on and off the trade.

A syndicate official away from the leads put the new issue premium at 7bp-8bp, saying that outstandings are very tight but without much trading in them.

“In relative value terms it’s attractive but in absolute terms it’s expensive,” he said, “also compared with agencies and Länder. It’s a solid order book.”

The deal is coming with a 0.75% coupon.

CBA returns in US dollars

Commonwealth Bank of Australia priced a US$1.5bn (A$1.64bn/Eu1.1bn) five year covered bond at 45bp over mid-swaps yesterday. The deal is CBA’s second benchmark covered bond this year, after a $2bn three year in early January.

It is the third US-targeted Australian benchmark covered bond in three weeks. Westpac sold a $1.5bn five year at 46bp over on 18 November and National Australia Bank a $1.25bn long five year at 47bp over on 21 November.