BayernLB nipped into the market today (Wednesday) to launch a Eu500m no-grow seven year covered bond that was more than twice oversubscribed, but which syndicate bankers expect to be the week’s only deal with US non-farm payrolls and an ECB meeting tomorrow.

Leads BayernLB, BNP Paribas, ING, Natixis and NordLB went out with initial price thoughts in the 5bp over mid-swaps area for Bayerische Landesbank’s deal. Having collected more than Eu600m indications of interest, the leads went out with guidance of 3bp-4bp over, before fixing the spread at 3bp over on the back of a Eu1.1bn order book comprising 80 accounts.

A syndicate official away from the leads said that the size of the order book was impressive, with German issues of that size normally attracting significantly lower investor interest. He added that based on the success of the deal, other German issuers may be tempted to come to market.

“However, there are no big events on the horizon that could potentially change the market, so spreads are not likely to move very much,” he said. “This may restrain issuers from rushing.”

A syndicate official at one of the leads said that two Landesbank Hessen-Thüringen (Helaba) deals were used as comparables, a May 2021 priced at 3bp in May over and trading at 1bp over, and a July 2022 trading at 2bp through mid-swaps.

“Considering where the two Helaba deals are now trading, I believe we priced close to flat to them today,” said the syndicate official. “Helaba is the best name in the Pfandbrief market, so we can consider this a successful trade.”

The syndicate official away from the leads said that at 3bp over, the transaction had come 1bp tighter than where he would have expected the leads to fix the spread, and that this was indicative of a successful deal. He added that while he had been unaware that the German issuer was planning to return to market – with its second euro benchmark covered bond of the year, following a Eu500m 10 year priced in April at 8bp over – he was unsurprised to see the name.

Another syndicate official away from the leads said that he was also unaware that a deal was on the cards until seeing the mandate this morning. He said that the deal had gone well, adding that he would have been surprised if it had not been well received.

“Investors would like to see a lot more deals as they have cash to burn,” he said. “As such, I feel almost any issue will succeed in this environment.”

No further deals are expected this week, according to syndicate officials, with one predicting a quiet month for July due to issuers “being Eu10bn ahead of envisaged volume for the year-to-date”. However, he noted that a peripheral issuer from Italy or Spain is considering coming to market with a euro benchmark.

Before today, the last euro benchmark was a Eu1.75bn dual-tranche transaction from Nationwide on 18 June, which comprised a Eu1bn five year priced at 8bp over and a Eu750m 15 year priced at 31bp over. On 23 June Deutsche Pfandbriefbank tapped a January 2017 covered bond for Eu150m.