Westpac is launching its inaugural euro benchmark covered bond today (Thursday), a four year issue that orders of around Eu3.5bn show to have been eagerly taken up by investors, with a lack of supply and attractive pricing seen as supporting the deal.

The euro transaction follows a $1bn five year from Westpac in November 2011, which was the Australian bank’s first covered bond, and a A$3.1bn dual tranche Australian dollar denominated deal sold on 24 January.

Barclays Capital, Citi, Deutsche Bank and Westpac opened order books for the euro issue on the basis of initial guidance of 75bp-80bp, and will price the deal at 72bp over after having gathered around Eu3.5bn of orders. The order book is the biggest for an Australian euro deal.

The pricing on the 2016 issue compares with re-offer spreads of 100bp over for five year deals sold by Commonwealth Bank of Australia and National Australia Bank in early January, although their spreads have tightened “pretty aggressively”, according to a syndicate official away from the leads.

He said that the level on Westpac’s deal looked “spot on”, with a Eu1bn NAB 2017 issue trading in the mid 70s and the curve between three and five years amounting to around 15bp-20bp. Fair value for a new NAB three year would be in the low 60s, he said, with initial guidance on Westpac’s deal representing a concession of 10bp-15bp.

“That’s fair value if you’re assuming it’s the same credit,” he said. “It’s the right range, and got a very good reception.”

A lack of supply in the four year part of the curve will have benefitted the deal, he added.

Another syndicate official away from the deal agreed the pricing was fair. He put NAB’s 2017 deal in the low 80s bid and CBA’s “a touch tighter”.

However, another syndicate official said the spread range on Westpac’s deal looked cheap, and that the size of the order book reflected this. He saw a Eu1.5bn 2017 CBA issue trading in the high 60s on the bid side and said this makes the 75bp-80bp range a defensive level. NAB’s 2017 issue is being quoted in the low 70s, according to him.

A strong bid for paper in the three to five year range suggested a tighter starting spread should have been chosen, he said, but he acknowledged the benefit of hindsight and said that a cautious approach “doesn’t make you wrong”. That the bond is Westpac’s inaugural euro deal may have influenced execution, he added.