WL Bank nipped into a volatile market to grab Eu500m in a seven year issue this (Thursday) morning, and met with strong demand despite tight pricing. Meanwhile, Pbb broke new ground with a 15 year Pfandbrief yesterday, according to the issuer.

Westfälische Landschaft Bodenkreditbank (WL Bank) priced the Eu500m no-grow mortgage Pfandbrief at 1bp over mid-swaps after having gone out with initial price thoughts of the low to mid-single digits and then guidance of the 2bp over area.

The order books were open for less than half an hour, according to updates from one of the leads – BayernLB, DekaBank, DZ Bank, HSBC, and WGZ Bank. On a post-reconciliation basis orders totalled Eu1.3bn.

A lead syndicate banker said that pricing inside Euribor was not envisaged and that a spread of 1bp over was the goal.

“It was an extremely quick process,” he said, “even quicker than I would have imagined so that is a positive surprise.”

The mandate for WL’s deal was announced yesterday (Wednesday) afternoon and although global market conditions worsened following volatility overnight in Asia the leads felt this would have not have an impact on the transaction and therefore proceeded with execution this morning, added the lead syndicate official.

Germany took 67.5%, Austria 12%, Scandinavia 9.4%, Asia 6%, and others 5.1%. Banks were allocated 51.1%, fund managers 26.8%, central banks 19.2%, and corporates 2.9%.

A syndicate banker away from the leads said the level was very expensive and “illogical”, but that a lack of supply and strong support from German investors explain the pricing. Avoiding a negative spread was the most important thing, he said.

An analyst said that WL’s new bond will fit “spot on” the issuer’s curve.

Deutsche Pfandbriefbank (pbb) sold the first 15 year Pfandbrief since 2003 yesterday. The Eu500m no-grow deal was also its first public sector backed benchmark since 2010, according to Bernd Volk, head of covered bond research at Deutsche Bank, and RBS analysts said it is the longest dated euro benchmark covered bond in three years.

Leads BNP Paribas, Commerzbank, Deutsche Bank, JP Morgan and LBBW priced the deal at 40bp over mid-swaps on the back of some Eu1.1bn of orders. It was re-offered at 98.612 and came with a 2.375% coupon to yield 2.487%.

The deal was aimed at satisfying investors’ search for yield and duration, with a 2.5% coupon targeted, according to Christian Klocke, covered bond syndicate at Commerzbank.

This was only narrowly missed, but no orders were dropped as a result, he said, even from those investors who had indicated a 2.5% coupon as a minimum requirement.

The last 15 year Pfandbrief was a January 2018 issue sold in 2003 by what was then Depfa Deutsche Pfandbriefbank, according to Klocke.

He said that long dated mortgage Pfandbrief issuance is unattractive due to a provision in German federal law that allows borrowers to terminate a mortgage in the after 10 years. This leaves supply of longer than 10 years to public sector Pfandbrief issuers, he added, of which there are very few with sufficiently long dated assets.

“It is unlikely that there will be many more ultra-long dated deals out of Germany,” he said, “but other markets might step in.”

Pbb said that 15 years is an exception in the Pfandbrief market, and that the issuer therefore is “breaking new ground”. The deal takes pbb’s capital market benchmark funding in 2013 to Eu2.36bn, including senior secured issuance, according to the issuer. Including privately placed Pfandbriefe, pbb raised some Eu3.1bn of long term funds in the first quarter of this year, it said.