Deutsche Pfandbriefbank (pbb) sold its first US dollar benchmark covered bond on Tuesday, a $500m three year issue, and the German issuer’s head of funding said it will probably return with one dollar benchmark per year, having hitherto awaited pricing improvements before joining its peers.

The deal is pbb’s first US dollar benchmark, with the German issuer having previously sold covered bonds in euros, sterling and Swedish kronor. Götz Michl, head of funding at pbb (pictured), said the issuer chose to enter the US dollar market to meet a natural need, as it holds dollar assets.

“We have in the past met these needs by funding in euros and swapping over, but obviously we prefer to get funding in the right currency to save the cross-currency swap,” he said. “This is what we have previously done with Pfandbriefe in sterling and in Swedish kronor, to match assets in those currencies.

Michl said pbb had been monitoring the dollar market for some time.

“There have been windows where we have seen German issuance in dollars, like in February and March of last year, when we decided not to join in,” he said. “In this latest window that opened this summer, dollar Pfandbriefe are back in the market, and this time we decided to use the window as well.”

Pbb’s deal followed a series of Eurodollar issues from German banks. MünchenerHyp sold a $600m three year on 12 July and BayernLB a $300m three year on 2 August, before Helaba on 9 August sold a $600m four year. The deals were priced at 48bp, 45bp and 50bp over mid-swaps, respectively.

Bankers noted that changes in the euro/US dollar basis swap had made funding in dollars particularly attractive to European issuers, with the Eurodollar issues being priced on a par with what would have been achievable in euros.

Pbb chose this window in particular to make its debut, Michl said, because of the favourable pricing levels available.

“The overall price we produced with this dollar trade is basically the same price we would get from a euro, after we swap it,” he said. “Therefore there was no additional cost to produce the correct currency to match the dollar assets.

“It is not about opportunistic trades, to get cheaper funding. If the dollar funding looks more expensive than the euros, then there is the question of if you really want to pay up for the new currency.”

Pbb leads BayernLB, Commerzbank, Goldman Sachs, JP Morgan and Nomura priced the $500m (Eu442m) three year Reg S public sector Pfandbrief on Tuesday morning at 60bp over mid-swaps, in the middle of initial price thoughts.

“In the end the demand was in line with our expectations,” said Michl. “Foreign currencies are not as simple as euro trades.

“It was important for us to enter the US dollar market. We already do a lot of funding in sterling and in Swedish kronor, and this was the right move to make.”

Bankers away from the deal noted that pbb offered a pick-up versus the recent German Eurodollar supply, which they said was appropriate given its Pfandbriefe are lower-rated. Deutsche Pfandbriefbank’s public sector Pfandbriefe are rated Aa1 by Moody’s, whereas all previous dollar Pfandbriefe this year have been rated triple-A.

Michl said pbb will continue to monitor the dollar market for further opportunities, but that the issuer will probably not sell more than one $500m deal per year.

“It will depend on the windows and on the price,” he said. “If we can produce the dollars at levels that are competitive to euros, that’s fine.

“But if the market is not there, then we will produce the euros and swap them.”

Pbb has sold three euro benchmark covered bonds this year, the last a Eu500m 19 year issue in April, and Michl said it could return to the market again this year.

“We have a very high liquidity position, and therefore do not need to bring another benchmark,” he added. “The final decision has not yet been made.”