Landesbank Baden-Württemberg is set to launch its first dollar benchmark covered bond since July 2010 tomorrow (Thursday), a $500m three year Reg S mortgage Pfandbrief issue, after Westpac yesterday priced only the second US-targeted benchmark of 2015, a $1.5bn five year.

LBBW has mandated Citi, LBBW, RBC and UBS for its return to the dollar market, which unlike Westpac’s issue will not be with 144A documentation. The German issuer has previously issued covered bonds in dollar benchmark format, but not since July 2010, when it sold a $500m (Eu402m) three year.

A banker close to the deal said that fair value is seen at around the low to mid-20s over US dollar mid-swaps. He said that in the mid-20s over mid-swaps the deal would offer a premium over equivalent euro levels of the low double-digits, meaning that it could prove attractive to investors keen on the name and who can buy dollar-denominated covered bonds. He added that the issuer is launching the transaction to fund US dollar assets and to optimise its funding structure.

Westpac’s $1.5bn (A$1.75bn) five year issue was only the second dollar benchmark of the year, after RBC sold a $2bn five year at 44bp over mid-swaps on 29 January. The Australian bank last tapped the dollar market in May 2014 with a $1.75bn five year deal.

Leads Barclays, Citi, RBC and Westpac are understood to have gone out with initial price thoughts of the mid-40s over mid-swaps, then revised this to 41bp-42bp over and fixed the spread at 41bp over mid-swaps. This compares with a re-offer spread of 44bp for RBC’s five year, which said to have been at 37bp over yesterday (Tuesday).

The leads are reported to have built a book of some $2.3bn.

A syndicate official away from the leads said that the deal went well.

“It’s a great trade for them to do,” he said. “The pricing is flattish to offering a little arb versus euros and they can get size done in dollars where there is not any competing supply.

“The Australians have been quite active in euros and staying away with a dollar deal shows some nice diversification.”

Another banker away from the leads agreed, adding that the price seemed sensible.

“It was a really nice trade,” he said.