Münchener Hypothekenbank is launching the largest dollar covered bond for a German issuer since early 2011, but is eschewing the 144A format and US sales in aiming to price a $500m (Eu401m) three year Pfandbrief before the release of non-farm payroll numbers today (Friday).

The Reg S deal is set to be priced before the US data release at 1330 London time/0830 EST, with leads Goldman Sachs and Nomura having gone out with guidance of the mid-swaps plus 65bp area.

The issuer is understood to have been considering a dollar issue for some time and to have gone ahead with the new issue on the back of a reverse enquiry.

“One account said that he would take a decent size and we were able to open it up more broadly and grow it into a sort of benchmark,” said a syndicate official at one of the leads. “We could have done more, with New York interest, but want to price it before the non-farms.”

Some 20 accounts placed orders for the deal, with demand coming from a mix of central banks, supranationals and other official institutions, as well as some European private bank interest.

According to analysts at RBS, the deal is the first German dollar covered bond since Landesbank Hessen-Thüringen (Helaba) and Landesbank Baden-Württemberg launched $500m floaters in January and February 2011, respectively. The last fixed rate dollar benchmark for a German issuer was a $500m three year issue for LBBW in July 2010. German issuers have yet to target US accounts since the dollar market reopened to benchmark covered bond issuance at the start of 2010.

A banker away from the leads reported better customer buying of dollar covered bonds in the past couple of weeks, with spreads continuing to grind tighter, particularly with regard to Scandinavian names.

“The demand has come from a whole host of accounts – bank treasuries, asset swappers, real money – and the tightening has taken spreads – from what I would say was too cheap a couple of weeks ago – to what is now fair value,” he said.

The lead syndicate banker said that as Münchener Hyp has dollar assets to finance the new issue was not arbitrage driven.