NordLB is gearing up for possible launch of what would be the first US dollar covered bond benchmark in 144A format from a German issuer since the beginning of the crisis, with investor calls and meetings scheduled for today (Thursday) and tomorrow, and banks having been mandated.

Bank of America Merrill Lynch, Barclays, BNP Paribas, Credit Suisse and HSBC have the mandate for the potential deal, and are organising a conference call for US and European investors this afternoon, with meetings due to take place in London tomorrow (Friday), too.

A deal would be the first US-targeted benchmark covered bond from a German issuer since the crisis, with dollar Pfandbriefe since then having come in Eurodollar and Reg S format. The last dollar benchmark from a Germany issuer was a $500m (Eu386.10m) three year deal in this format from Münchener Hypothekenbank in July.

NordLB, Hannover

NordLB has been planning its approach to the US market for some time, with completion of a programme allowing the bank to proceed with formal investor work.

A syndicate official at one of the leads said that the meetings and calls will provide important insights into the level at which investors would see value in a NordLB deal, and that any potential arbitrage would in part depend on this.

“The basis swap has been relatively volatile,” he added. “There’s been a massive spread rally in euros, and dollar spreads have rallied, too, but not as much as in euros, especially for the Germans.”

The US dollar market is on track for an annual covered bond issuance record, according to UBS sales and trading, despite a third quarter that provided less supply than the previous quarters.

“With spreads tightening up to 10bp in the five year part of the curve for core country names from Switzerland, Australia and Scandinavia, and the limited execution risk as shown by the market lately,” said the bank, “we believe US dollar covered issuance will remain a good opportunity for issuers versus a more challenging euro market.”

The last euro benchmark covered bond to have hit the market was a Eu500m no-grow seven year Deutsche Hypothekenbank mortgage Pfandbrief that struggled to gain traction with tight pricing.