NordLB is set to follow its sale of the first ever aircraft Pfandbrief last week by launching a long seven year public sector Pfandbrief tomorrow (Tuesday), with new issue prospects otherwise looking remote despite core covered bonds reportedly being in demand.

NordLB has mandated Credit Suisse, ING, Natixis, NordLB and UniCredit to lead manage what will be the issuer’s first benchmark backed by traditional assets since January 2011, when it sold a Eu1bn 10 year that was this (Monday) morning said to be trading at 17bp/15bp over mid-swaps. Another banker said that on an interpolated yield spread basis the 2021s were around 16bp bid.

Lead syndicate officials said that recent Pfandbrief 10 year deals also serve as references, with one saying that a BayernLB Eu500m 10 year public sector issue, which was priced at 17bp over, is trading around 17bp/15bp, and that the yield curve is fairly steep at the long end.

The last Pfandbrief benchmark to come with a 2019 maturity was a Eu500m mortgage backed issue for Deutsche Pfandbriefbank on 24 May. That was priced at 60bp over mid-swaps.

On Tuesday last week NordLB sold the first ever aircraft Pfandbrief, a Eu500m five year that was re-offered at 55bp over. A syndicate official on that transaction said it was trading some 10bp tighter this morning.

“I must admit I was pretty surprised to see them announce the new issue,” he added.

A syndicate official away from the new, public sector backed deal said he expects it to be well received.

“It will be very tight and will go well, without a shadow of doubt,” he said.

Another said he would assume that the new issue would come with a spread towards the 10bp over mid-swaps area.

A syndicate official said the market seemed slightly weaker today, but not significantly so, and that the primary market should remain a driving force as the secondary market remains quiet.

Others said that core covered bonds were well bid today, but that there was little sign of issuers looking to take advantage of an issuance window as they report to be well-funded.

“Things are winding down,” said one.