NordLB Luxembourg attracted Eu1.4bn of orders from over 100 accounts to a Eu500m 4.5 year lettres de gage deal today (Wednesday), putting down a new marker after its last benchmark underwhelmed and overcoming unfamiliarity with the jurisdiction partly thanks to its sought-after maturity.

The Luxembourg issuer’s deal is only the second euro benchmark in the four year part of the curve to be sold this year, following an August 2021 issue for Deutsche Pfandbriefbank on 1 February, and comes after recent results have shown strong investor appetite for shorter-dated paper.

After announcing a mandate yesterday (Tuesday), NordLB Luxembourg leads Commerzbank, DZ Bank, NordLB, UBS and UniCredit launched the Eu500m no-grow August 2021s lettres de gage publiques with guidance of the 18bp over mid-swaps area this morning.

Guidance was then revised to the 18bp area plus or minus 1bp, will price within range, on the back of books “well above” Eu900m, before the spread was fixed at 15bp with books above Eu1bn. The final book was in excess of Eu1.4bn, comprising 113 orders.

“It is a very good trade, helped most of all by the maturity,” said a syndicate banker at one of the leads. “A 4.5 year is what many people want to have, given that shorter-dated paper is the flavour of the month.

“A 4.5 year in positive yield territory and a double-digit positive spread – that’s magic.”

Bankers said the deal offered a new issue premium of around 5bp-6bp, seeing NordLB Luxembourg’s November 2018s at 2bp, mid, March 2020s at 7bp, and June 2023s at 13bp.

“It’s a fairly generous premium compared to what we’ve seen recently, but I think it was the right way to go,” said a banker away from the deal. “Given that this is still a fairly new jurisdiction, given that it’s not CBPP3-eligible, and given that their last deal wasn’t the best, they were right to start a touch more cautiously.”

NordLB Luxembourg’s last benchmark covered bond, a Eu500m seven year issue in June, was considered to have struggled partly because of investor unfamiliarity with the issuer and the jurisdiction. The new issue is only its fourth benchmark covered bond.

NordLB Luxembourg’s lettres de gage publiques are not eligible for the ECB’s covered bond purchase programme, as they are not compliant with CRR criteria necessary for preferential treatment – although they are UCITS-compliant.

The issuer’s German parent, NordLB, has also been affected by negative headlines surrounding its exposure to the shipping industry. The German bank’s last new benchmark issue, a Eu500m 10 year public sector Pfandbrief on 9 January, was initially deemed underwhelming, but the deal was on 31 January tapped by Eu300m on the back of over Eu370m of orders.

“It looks like investors have a bit of a complicated relationship with the NordLB family at the moment,” said a banker away from the deal. “But today’s deal went well.”