WL Bank sold its first benchmark Pfandbrief of 2013 yesterday (Thursday), a Eu500m no-grow seven year priced at a level the issuer had hoped for but had not necessarily expected to achieve, an official at the bank told The Covered Bond Report.

The deal was priced at 1bp over mid-swaps following guidance of the 2bp over area, with leads BayernLB, DekaBank, DZ Bank, HSBC and WGZ Bank building an order book of Eu1.3bn.

“We are very satisfied with the deal,” Robert Holl, deputy head of treasury, money and capital markets at Westfälische Landschaft Bodenkreditbank, told The CBR. “We hit a very good window and a very good level.”

The deal is the tightest seven year benchmark Pfandbrief to hit the market this year.

A syndicate official away from the leads noted that the result had been achieved despite a difficult backdrop yesterday – “a statement of its German quality”.

“Despite the market’s volatility and weak stock markets post-Bernanke, the deal convinced by all means,” he said. “Mid-swaps plus 1bp and more than Eu1bn of demand is as good as it can get.”

Holl said that the bank had been planning a new issue for some time, but delayed a move for reasons including holidays and because it was adding collateral to its cover pool.

The seven year maturity was chosen because it fit best with the cashflow structure of the collateral and the issuer’s benchmark yield curve, he added. WL Bank has benchmark Pfandbriefe outstanding in the 2017-2022 maturity range.

“We thought about a 10 year, but the structure of the cashflows from the cover pool worked best for a seven year,” he said.

The deal was capped at Eu500m to help streamline the issuer’s redemption profile and to leave room for further issuance, either in the second half of this year or in early 2014, according to Holl.

“The shadow book exceeded Eu500m quite quickly, and overall we decided to close books early after the good momentum,” he said.

There was very little price sensitivity in the order book, he added, with only a few orders dropping out when the spread was set at 1bp over. The issuer was aware that pricing flat to through mid-swaps would not be looked upon favourably by investors, said Holl, but this was not an issue for WL Bank’s transaction.

“We had hoped for 1bp over but had not necessarily expected it,” he said.

Sixty-one accounts participated in the deal. 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%.