Helaba has broken a two week lull in euro benchmark covered bond issuance by today (Tuesday) launching a seven year issue that will be the first Eu1bn sized German Pfandbrief of 2012. Meanwhile, Nykredit has mandated a euro benchmark Junior Covered Bond issue.

Helaba, Frankfurt

Leads Barclays Capital, BNP Paribas, Commerzbank, Helaba and UniCredit gathered around Eu1.3bn of orders for Helaba’s deal, a Eu1bn no-grow, and have fixed the re-offer spread at 15bp over mid-swaps, in line with guidance of the 15bp over area. This followed initial price thoughts of the mid to high teens.

Landesbank Hessen-Thüringen (Helaba) last sold a euro benchmark covered bond in April 2011, a Eu1bn five year public sector backed Pfandbrief that was priced at 10bp over.

Today’s deal will be for Eu1bn, the first German Pfandbrief of this size in 2012 after a series of Eu500m deals from the jurisdiction.

The deal is also the first euro benchmark covered bond since Axa Bank Europe SCF tapped the market on 3 April, with concerns about the global economy and Spain’s fiscal condition having contributed to unnerving broader markets and put pressure on peripheral bonds since then.

However, syndicate bankers said they were not surprised by the launch of a trade, with one noting that market conditions were better today and that Helaba was an ideal candidate to tap the market.

Another said last week offered a better issuance window than this one, but that Helaba is the kind of issuer that can tap the market almost regardless of the backdrop.

According to another syndicate banker, German and Scandinavian covered bond spreads have been fairly resilient in the face of weaker markets recently given some flight to quality.

“The well-bid element to that market has remained,” he said.

Syndicate officials away from the leads said the deal seemed to be going well given that the leads had moved from initial price thoughts of the mid to high teens to official guidance of the 15bp over mid-swaps area.

They put the new issue concession at around 5bp based on a secondary market level of 5bp over mid for an April 2017 deal from the issuer.

One said that this was probably marginally more than the issuer would have offered if it had launched a deal a few weeks ago, but that it was a smaller discount than what many other issuers would need to pay given Helaba’s rarity value.

Another said the new issue concession was minimal, and reasonable.

Helaba’s transaction is unlikely to unleash a wave of supply, according to syndicate bankers, who noted variously that French covered bonds remain under pressure, and that issuers are well funded and/or heading into blackout periods.

However, a successful auction of Spanish government bonds on Thursday could be a positive catalyst, said one, adding that issuers would be well advised to tap the market, with a conclusion of Moody’s bank downgrade reviews and French presidential elections on the horizon.

“Why take the chance of waiting?” he asked.

Meanwhile, Nykredit Realkredit will shortly be roadshowing a benchmark euro issue of Junior Covered Bonds, only the second such deal after a Eu500m debut transaction from the Danish bank in October 2010. BNP Paribas, DZ Bank, JP Morgan and Nykredit Markets have the mandate.

The deal will be launched out of the issuer’s Capital Centre H and is expected to be rated A+ by Standard & Poor’s.