BayernLB sold its first benchmark since May 2011 yesterday (Wednesday) and its first sub-Jumbo ever, although an official at the bank said that the issuer has yet to make a decision as to whether it will focus on sub-Eu1bn deals in future.

The bank last came to market in the middle of May last year, selling a Eu1.25bn three year public sector Pfandbrief at 6bp over mid-swaps, although it came close to launching a 10 year issue a few months later before pulling back when Moody’s put its public sector covered bond rating on review for downgrade the morning books were set to be officially opened.

Miriam Scuka, head of funding execution at BayernLB, told The Covered Bond Report that the issuer had drawn a line after this occurrence and that yesterday’s deal is not related to last year’s new issue project.

“This was a completely new transaction with a new rationale,” she said. “In our view there is no comparison to be made.”

Leads BayernLB, Crédit Agricole, Credit Suisse and RBS gathered slightly more than Eu750m of orders from some 60 accounts to price a Eu500m deal at 17bp over mid-swaps, which followed guidance of the 18bp over area and initial price thoughts of the 20bp over area.

The deal is BayernLB’s first sub-Eu1bn benchmark, and Scuka said that the issuer had deliberately chosen a benchmark rather than Jumbo target, clearly communicating that it would be satisfied with a tightly priced Eu500m deal.

The issuer has not made a decision as to whether it will focus on small benchmarks, however, she said.

“We are still deciding whether we will stick with this type of size,” she said. “The Basel III liquidity ratio rules are prompting us to think about this, and many other German issuers are active in the Eu500m bucket. A benchmark is defined as Eu500m-plus.”

The 10 year maturity was a strategic choice for the issuer, according to Scuka, with implications for market access.

“Issuance windows are getting shorter for longer maturities,” she said, “especially for sought after paper like Pfandbriefe where absolute re-offer yields are very low.”

And while an issuance opportunity arose toward the end of May it was quickly used by two of BayernLB’s peers, Münchener Hypothekenbank and Deutsche Bank, to sell 10 year deals, and Scuka said that a third Pfandbrief with this maturity would not have made sense.

BayernLB launched its deal for strategic reasons, she said.

“There was no pressing need from a funding perspective, but we wanted to show ourselves in the market given that we don’t want to rely solely on domestic funding,” she said.

Germany took 59% of the bonds, Switzerland 11%, France 9%, the UK 7%, Austria 5%, other Europe 4%, and Asia 5%. Banks were allocated 48%, asset managers and insurance companies 26%, and central banks 26%.