NordLB announced the mandate for a public sector Pfandbrief roadshow today (Monday) and is understood to have its eyes on a return to the US market, while Aareal priced a FRN ahead of what is expected to be a quieter week in benchmark covered bonds.

Market conditions remain conducive for new issuance in euro benchmark covered bonds, said bankers, although negotiations are still going on in the US Congress to raise the debt ceiling and avoid a potential default on government debt ahead of a Thursday deadline.

“The market opening was as if nothing is going on in the US,” said a syndicate official. “Ninety-five per cent of market participants expect a positive outcome.”

Another syndicate official said that credit indices were some 4bp-5bp wider this morning in response to a lack of definitive news emerging over the weekend about the US situation, but that cash bond markets are still outperforming.

Syndicate bankers said that the market is open to issuers across formats and jurisdictions and that they expect some deals, but not a wave of supply. Blackout periods have started for several issuers ahead of Q3 financial results, they noted.

The public benchmark covered bond pipeline was replenished with the announcement of a public sector Pfandbrief roadshow mandate for NordLB today. The German bank will be meeting with investors in Europe and the US and a US-targeted 144A deal is understood to be the target should a transaction emerge after the roadshow.

A $1.5bn five year SEB transaction on 21 May was the last US targeted deal from a European issuer.

A deal from NordLB would be the first 144A deal from a Pfandbrief issuer since the German bank made its debut in the US market with a $1bn three year public sector deal in October last year. The 2015 issue was priced at 50bp over mid-swaps, and was today said to be quoted around 30bp/25bp over.

In preparing for a potential return to the US market the issuer is understood to be aiming to stay true to its communicated intention to maintain a presence in the market. NordLB has “a not insignificant” amount of US dollar denominated assets on its balance sheet, said an official close to the roadshow project, and the US market has strategic importance for the issuer.

Bank of America Merrill Lynch, Barclays, Credit Suisse, Goldman Sachs and HSBC have the mandate for the roadshow, which will start on Wednesday in London before moving on to Copenhagen, Oslo and Zurich. There are five US legs to the roadshow, kicking off in New York on Monday.

The only syndicated new issue in covered bonds today was a Eu200m three year floating rate note for Aareal Bank. Leads Natixis, UniCredit and WGZ Bank priced the mortgage Pfandbrief at 11bp over three month Euribor, in line with guidance of the 11bp over area. The deal was marketed as for Eu150m.