Germany’s pbb is set to price the first benchmark covered bond since the summer recess, having today (Monday) announced the mandate for a three year mortgage Pfandbrief expected to be for tomorrow, while US-targeted supply has also been mentioned.

Commerzbank, Deutsche Bank, HSBC, LBBW and WGZ will lead manage the Deutsche Pfandbriefbank (pbb) transaction, which will be for a maximum of Eu500m and is likely to be tomorrow’s (Tuesday’s) business.

A deal will be the first new issue in benchmark covered bonds since the end of July, when Italy’s Banca Popolare di Sondrio sold a Eu500m five year issue at 75bp over mid-swaps. That was sole-led, however – the last new issue executed via multiple lead managers was for Deutsche Hypothekenbank on 21 July, a Eu500m five year that came at 1bp over.

Benchmark covered bond supply since July has been limited to three taps, one of which was from pbb, although this was a retention trade. It was a Eu175m increase of a March 2019 mortgage Pfandbrief. The leads did not disclose the re-offer spread, but pricing of 102.09 on the day (18 August) was said to be equivalent to around 2bp over mid-swaps.

A syndicate banker at one of the leads for pbb’s planned new issue cited an outstanding pbb July 2017s as a comparable, and said that most of the leads saw this at between 4bp and 4.5bp through, mid.

Landesbank Hessen-Thüringen (Helaba) priced a Eu500m tap of a May 2017 public sector Pfandbrief at 10bp through on 21 August. Helaba’s public Pfandbriefe are rated Aaa and AAA by Moody’s and Fitch, while pbb’s mortgage Pfandbriefe are rated Aa2 by Moody’s and AA+ by Standard & Poor’s, on negative outlook.

Meanwhile, US-targeted covered bond supply could also emerge soon, alongside US dollar senior unsecured issuance being eyed by UK banks, according to syndicate officials.

Only two US dollar covered bonds have been sold this year, both for Australian banks, with the dollar market generally seen as struggling to compete with the lower cost of funding attainable via euros.

A syndicate official this morning, for example, noted that the level that National Australia Bank achieved for a tap of a seven year euro deal on Wednesday would only be enough for a five year in dollars, if that. NAB priced a Eu500m increase of a May 2021 issue at 9bp over mid-swaps, which the syndicate banker said was equivalent to around 33bp over in dollars, and that this is “arguably where they would come in five years in dollar covered, not seven years”.

Commonwealth Bank of Australia and Westpac Banking Corporation are the two issuers to have tapped the US dollar market this year, with each selling five year deals at 35bp over. Westpac’s was for US$1.75bn (Eu1.33bn, A$1.87bn), and CBA’s for $1.25bn.

But dollar covered bond supply is expected, both notwithstanding the strength of the euro market and because the levels achievable in dollars relative to euros are beginning to improve.

“Dollar pricing is for the first time in covered starting look in line, or in the zone, relative to euros, and certainly for non-European names it’s looking very good,” said one syndicate banker.

Another said that Australian, Canadian and some European issuers are “keeping an eye on the US market alongside a very well bid euro market”.

Bank of Nova Scotia is in a position to sell SEC-registered covered bonds into the US after having on 20 August filed a covered bond prospectus with the Securities & Exchange Commission.

Today is the Labor Day public holiday in the US.