National Australia Bank achieved a “solid print” when it yesterday (Wednesday) priced a Eu750m seven year covered bond, according to a syndicate official on the deal, despite bankers away from the leads suggesting that the book had been a “slow build”, with ECB ineligibility cited.

Leads Barclays, Credit Suisse, National Australia Bank (NAB) and RBS went out with initial price thoughts of the 28bp over mid-swaps area, before setting guidance at the 27bp over area with indications of interest in excess of Eu700m.

The order books did not officially close until 1430 London time, when the spread was fixed at 26bp over and the size set at Eu750m on the back of more than Eu1bn of orders.

Syndicate officials away from the deal suggested that the timing between IPTs and guidance, and then again from guidance to books closing was indicative of a slow book-build.

A syndicate official at one of the leads said that this was a fair comment to make if comparing NAB with a European issuer, noting the strength of recent European book-builds. However, he added that this is mitigated by the lack of a bank treasury bid for covered bonds that are not repo-eligible with the ECB.

“You have got to be cognisant that when you’re looking at the Australian banks, the European Central Bank repo-eligibility issue compared with European banks will raise up its head,” he said. “Bank treasuries now will be looking to take on more covered bonds for their LCR portfolios in the wake of recent announcements regarding Basel III, but they will be wanting them to be ECB repo-eligible, which the Australian banks are not.”

As a result, while the underlying credit of an NAB covered bond is comparable to that of a European covered issuer, he added, the potential pool of investors is significantly lower.

Syndicate officials on the deal had used Westpac March 2021s as comparables, which yesterday were trading at 22bp-23bp over, which led them to put fair value for the new NAB trade at 23bp over. The lead banker said that to price the bond with a 3bp new issue premium demonstrated the quality of the order book, adding that this was a “solid print”.

Another lead syndicate official noted that the covered bond had since tightened by 1bp this morning.

“This deal had a good quality order book, and it was the right thing to print the smaller trade,” he said.

According to the other lead syndicate official, the transaction was announced as a benchmark.

The deal is the issuer’s first euro benchmark covered bond since May 2013, when it sold a Eu750m 12 year at 33bp over, although it has since tapped the sterling and US market with covered bonds.

As for future issuance, a syndicate banker on the deal said that he would be surprised if NAB returned soon to the euro benchmark market, citing the gap between its most recent two transactions in the asset class.

“They have an established curve and they will be looking to maintain that,” he said.

Germany and Austria took 48%, the Benelux 16%, the UK and Ireland 8%, eastern Europe 7%, France 6%, the Nordics 5%, Asia 3%, Switzerland 2%, and others 4%.

Banks were allocated 32%, asset managers 24%, agencies and central banks 21%, insurance companies and pension funds 16%, and corporates 7%.