B of I closes order book for €2bn bond

Bank of Ireland closed the European order book for its new €2 billion bond yesterday afternoon after it attracted almost double the targeted level of subscriptions.

Indications from the bank last night suggested that the bond, an asset-covered security (ACS), will have received subscriptions of more than €4 billion by the time Asian orders are processed overnight.

The bank is not expected to increase the size of the offering, however, preferring instead to issue a €2 billion security now and approach the market again next year and in each of the following three or four years.

The bank issued its inaugural ACS, a five-year bond backed by a tranche of Bank of Ireland mortgages, last year. The offering launched yesterday morning is a 10-year product, with the bank citing investor feedback as the reason for selling a longer-maturity structure this time around.

Again, it is backed by residential mortgages from the Republic and, as such, can be viewed as a bet of sorts on the Irish economy.

Mick Sweeney, chief executive of Bank of Ireland Global Markets and architect of the deal, said yesterday that the quality of the orders received to date had been high, with many subscriptions coming from investors who had not previously bought into any covered bond market.

Within Europe, some 250 orders had been received from 20 countries by 3pm, with subscribers including fund managers, insurance companies and central banks.

A "very strong segment" of orders came from the Republic and the UK, Mr Sweeney said. He acknowledged that Asian demand will probably not reach the 11 per cent of sales achieved with last year's ACS, with investors in Asia preferring shorter-dated products.

The bond will not be priced officially until tomorrow, but the market was last night expecting a price of mid-swaps plus six, or about 16 basis points above equivalent German government bond yields.