HYPO NOE Gruppe Bank is planning to launch a first mortgage covered bond benchmark in 2014, the Austrian bank’s head of group treasury told The Covered Bond Report, after its Hypothekenpfandbriefe were provisionally rated Aaa by Moody’s today (Thursday).

The Austrian bank has issued several public sector Pfandbriefe in recent years, but has not previously issued mortgage Pfandbriefe.

“The plan is to go for a mortgage Pfandbrief issue in benchmark format in 2014,” Thomas Fendrich, head of group treasury at HYPO NOE Gruppe Bank, told The Covered Bond Report. “However, it will not be for more than Eu500m.

“Anything more than that would not fit our ALM needs and would be too big.”

Fendrich said that henceforth HYPO NOE would probably launch either a mortgage or a public sector backed benchmark every year, although not both.

According to Moody’s, HYPO NOE’s mortgage cover pool comprises 40.7% housing mortgage loans, 34.2% commercial real estate and 25.1% residential mortgages, with 73.7% of properties being in Austria and 26.3% in Germany. The pool’s total weighted-average LTV is 60%.

Moody’s assigned the cover pool a collateral score of 10.3% and assessed cover pool losses at 25.7%, split between market risk of 18.8% and collateral risk of 8.9%.

The programme’s Timely Payment Indicator (TPI) is “probable” and Moody’s said it has TPI Leeway of one notch.

HYPO NOE’s most recent public sector benchmark was a Eu500m seven year deal on 7 October via BNP Paribas, Commerzbank, Crédit Agricole, LBBW and RBS, which attracted more than Eu1bn of orders from 54 investors.

Marketed without an initial price thoughts (IPTs) process, the deal was priced at 13bp over mid-swaps after fixed spread guidance of 15bp plus or minus 2bp. Fendrich said that it was important to him to set guidance at a fixed spread range as investors had in meetings with the issuer expressed discontent with large spread tightening after initial price thoughts.

“We asked ourselves how where a deal should come based on outstanding levels and how we can best market it without losing out on the early momentum that you want to generate,” he told The CBR at the time of the deal. “The lead managers wanted to start with a wider spread but I argued for a fixed range of the 15bp area plus/minus 2bp, and am very glad that I got my way.”

This way the issuer was able to avoid pricing at a tighter spread of 10bp-12bp over, he added, which although possible would have risked undermining the potential for secondary market performance, an important goal for the issuer.

“I’m very happy with 13bp over and the quality and size of the orderbook,” said Fendrich. “I have realistic expectations for pricing, and it’s not just about the one deal but securing investor appetite for future transactions, too.”