BayernLB priced the first benchmark covered bond since mid-June yesterday (Wednesday), a Eu500m seven year that an official at the issuer said benefitted from being the only deal in the market and was “a resounding success”, with bankers noting good secondary market performance.

Yesterday’s deal, a Eu500m no-grow public sector Pfandbrief, follows a Eu500m 10 year Pfandbrief issued by the German bank in April at 8bp over, and Miriam Scuka, head of funding execution at Bayerische Landesbank, said that as of today she does not expect the issuer to be back with a further euro benchmark before next year.

“We wanted to be in the market twice this year,” said Scuka. “We had a strong feeling about the market and opted to take advantage of the lack of competing supply, generating Eu500m of IOIs in less than 30 minutes.

“It was a resounding success.”

Leads BayernLB, BNP Paribas, ING, Natixis and NordLB went out with initial price thoughts of the 5bp over mid-swaps area and, after collecting more than Eu600m of indications of interest (IOIs), set guidance at 3bp-4bp over. In just over an hour they had collected close to Eu1.2bn of orders – one of the largest order books for a Eu500m Pfandbrief this year – at which time they fixed the spread at 3bp over.

“Being the only name in the market allowed us to capitalise on heightened investor appetite for covered bonds,” said Scuka. “We generated a lot of interest with this deal, and the order book showed good granularity, with a particularly strong savings banks presence – which we view as positive due to their buy-and-hold mentality.”

A syndicate official at one of the leads said that IPTs of the 5bp over area proved “eye-catching” for investors and that while it would have been possible to price the deal at 2bp over, such a spread may have hindered secondary market performance.

Instead, the deal has tightened considerably, according to the syndicate banker.

“It is trading at flat/3bp through mid-swaps,” he said.

A syndicate banker away from the leads said the deal went well, but added that it, like most transactions these days, was not very complicated. The new issue premium was limited, he added, and the bonds have tightened to mid-swaps flat.

Germany was allocated 76%, Luxembourg 9%, Scandinavia 7%, Asia 2%, Austria and Switzerland 2%, and other Europe 4%. Savings banks took 33%, banks 30%, asset managers 19%, central banks and agencies 10%, corporates 6%, and insurance companies 2%.