LBBW navigated a narrow window today (Tuesday) to print a Eu750m five year covered bond, but while bankers praised the outcome they differed as to whether the market was now open for more. Meanwhile, RBC tapped sterling and CIBC is set to launch a dollar issue.

Landesbank Baden-Württemberg’s deal is the first recognised benchmark euro covered bond in four weeks – following a Eu500m seven year HSH Nordbank issue on 15 of June, with a Eu500m three year sold by Caffil last Thursday widely considered to have been closer to a club deal than a typical benchmark.

Leads BNP Paribas, DZ Bank, LBBW, Natixis and UniCredit launched the Eu750m five year mortgage Pfandbrief this morning with initial price thoughts of the 11bp through mid-swaps area. They then set guidance at the minus 13bp area with the books above Eu1.5bn, before fixing the re-offer at minus 15bp, building a final order book of Eu2bn.

“This was a really good execution and an all-round solid trade,” said a syndicate official away from the leads. “It offers a relatively low new issue premium, attracted surprisingly good demand, and they probably could have printed even more in terms of size.”

Other syndicate officials away from the deal agreed, in particular stating that the issuer had picked its window well in a week that – with a deadline for Greek implementation of initial agreement measures tomorrow (Wednesday) and an ECB meeting on Thursday – still featured many obstacles to euro issuance, despite a positive outcome to negotiations between Greece and its creditors yesterday (Monday) morning.

“What we learned yesterday is that this decision to reach a solution on Greece is not the solution itself,” said one. “There is still a way to go so there is still event risk for issuers. If you decide to wait for a completely clear window then you might be waiting for weeks or months, so other issuers will have to do as LBBW have done here and choose wisely.”

Despite citing the deal as a success, however, syndicate officials were reluctant to describe it as a reopener of the euro market. They stated that windows for issuance would remain narrow and that LBBW receives high levels of demand from German accounts – as demonstrated by the decision to launch the new issue while France observes a public holiday for Bastille Day, they added.

“It is a great deal and looks to have gone very well,” said one, “but LBBW is a blue chip German name and they receive strong domestic support from bank treasuries, so I would not call this a market reopener for the broader base.

“Yes it is a fantastic deal, but LBBW could probably go to the market at any time. I certainly would not now go to peripheral issuers and tell them ‘yes, you can go to the market now’.”

Another syndicate official agreed that non-German issuers could not interpret much from the deal’s outcome, but added that it was at least encouraging.

“I am not sure if this deal truly reopens the market, but it does give the market more confidence that deals are possible with the right parameters,” he said. “Because of this other issuers will be considering again doing deals before the summer break, and there is more activity behind the scenes.”

However, another syndicate official said that the deal, alongside Caffil’s club-style issue, could provide a template for new deals.

“I think this deal cracks the door open a little more for new euro issuance,” he said. “Between this and Caffil’s trade from last week – although both are slightly special cases – issuers have been shown how a deal might be done in this market.”

The new issue offered a 6bp-7bp new issue premium, according to syndicate officials away from the leads, who cited five year issues from German peers as trading at around minus 22bp, mid.

LBBW’s last euro benchmark covered bond was a Eu500m four year issue in January, which was priced at mid-swaps minus 16bp and was now seen as trading at minus 20bp, mid.

Meanwhile, in sterling HSBC, Lloyds and RBC are pricing a three year FRN for Royal Bank of Canada at 28bp over three month Libor, in line with initial price thoughts, after having built a book of over £400m for a £250m minimum deal, with the final size not yet announced by the time The CBR went to press.

A syndicate official away from the leads noted the initial price thoughts were around 8bp back from the level at which most recent sterling covered bonds had been priced.

“If you look at sterling issues from RBC’s natural peer group, they were all issued at around 18bp to 21bp,” he said. “Yes, spreads have widened, but except for different beasts like Deutsche Pfandbriefbank and Leeds Building Society, we haven’t seen sterling covereds at these spreads since January 2014.

“That is quite a walk back.”

CIBC is expected to sell a five year US dollar benchmark later today. CIBC, Citi, HSBC, JP Morgan have the mandate.

A syndicate official away from the leads said he expected the 144A deal to be priced in the mid-40s, close to the level a Commonwealth Bank of Australia $1bn five year was priced at last Thursday, 45bp over.

“The US market does not differentiate much between names and jurisdictions as long as the credit and collateral is good,” he said. “Before Greece the going rate for US dollars was 37bp, now it is likely 45bp.”

Another syndicate official said the dollar and sterling markets will likely stay open throughout the week, providing another option for some issuers.