WL Bank attracted over Eu800m of demand for a Eu500m seven year Pfandbrief today (Thursday) that bankers said had gone well given reduced demand for German paper, after a full menu of supply with more appealing spreads in recent sessions, and with volatility through the morning.

The new issue for Westfälische Landschaft Bodenkreditbank (WL Bank) comes after three issuers tapped the euro covered bond market yesterday selling Eu4.5bn of benchmark supply, including a “blowout” dual tranche deal for Crédit Agricole, a debut for Denmark’s BRFkredit and a rare Axa Bank Europe SCF issue.

German supply has been relatively limited, with a Eu1bn long six year for Helaba on Monday just subscribed and the last previous benchmark Pfandbrief a Deutsche Bank deal on 1 March, whereas German issuers had dominated supply in February when conditions had been more challenging.

“Pfandbriefe were of course the flavour of the month while things were difficult,” said a syndicate official. “Now there’s a fuller menu of supply – including rare names and some eye-catching spreads – and lower yields, investors’ focus is elsewhere.”

WL Bank leads Commerzbank, DZ, LBBW, SG and WGZ launched the Eu500m no-grow seven year mortgage Pfandbrief with guidance of the flat to mid-swaps area, before fixing the spread at minus 2bp on the back of books “well above” Eu700m. The book closed at over Eu800m from close to 40 accounts.

“It’s a decent result,” said a syndicate official away from the leads. “It’s not as exuberant as the other, non-German supply we have seen this week, but it seems like a smooth, quick trade.”

A syndicate official at one of the leads noted that the price movement was more limited than had been achieved in most recent trades, and said that there had been some price sensitivity at the minus 2bp level.

“This is not the easiest trade to do in this market, compared to some of the recent supply from the less expensive jurisdictions, which has all gone very well,” he said. “Pfandbrief are of course very expensive next to some of the alternatives that have been in the market this week, from other core countries that are able and willing to pay up.”

“However, in the end this worked well and is comfortably oversubscribed, and it is a good result.”

The lead syndicate official added that volatility in yields today had also likely had a negative impact on demand for the deal, with the 10 year Bund future opening at 161.7 – having remained at around that level yesterday – before rising to 162.3 and remaining volatile through the morning.

“That also partly explains the more modest level of oversubscription here, I think,” he said.

The book was driven by domestic demand, according to the lead syndicate official, but also included good participation from Nordic and Benelux accounts, he said, as well as central banks outside the Eurosystem.

Syndicate officials at and away from the leads said the deal offered a new issue premium of around 4bp, seeing WL Bank’s July 2022s at minus 7bp, mid, October 2023s at 6bp, and September 2024s at minus 5bp.

Bankers said that market sentiment remained strong, in spite of the slowdown in supply, and said takeaways from WL Bank’s deal are limited for non-German issuers.

“You get the sense today that issuers are waiting for the dust to settle after the FOMC yesterday,” said one. “I would not be surprised to see more supply tomorrow, and to see it go well.”