Aareal Bank reeled in over $1bn of orders to a $625m (Eu525m) three year Reg S Pfandbrief today (Wednesday) that is the tightest US dollar benchmark covered bond in over two years, albeit with an attractive pick-up versus secondaries.

Following a mandate announcement yesterday (Tuesday), Aareal leads Citi, Credit Suisse, Goldman Sachs, HSBC and LBBW launched the Reg S mortgage Pfandbrief this morning with guidance of the 40bp over mid-swaps area. After just under one and a half hours, the leads announced that they had received over $800m of indications of interest.

Guidance was this afternoon revised to 38bp-40bp, will price within range, on the back of IOIs in excess of $900m. The spread was later set at 38bp and the size at $625m, with books in excess of $1bn.

“It looks to have gone very well,” said a syndicate banker away from the leads. “The books are towards the higher end of what we have seen for recent Eurodollar trades, so they can be pleased with that.”

The deal is understood to be the tightest benchmark fixed rate US dollar covered bond since July 2015, when DBS Bank priced a $1bn three year issue at 37bp.

Bankers said the deal offered a new issue premium of the mid-to-high single digits, seeing Aareal’s US dollar April 2019s at 18bp, mid, pre-announcement, LBBW $650m May 2019s at 18bp, and January 2020s at 29bp.

The deal also offered a pick-up versus US dollar 2020 covered bonds from Canadian, Australian and Nordic issuers (including 144A and Reg S-only issues), which were seen trading in the high 20s-low 30s, mid.

“It was a fairly tight print but, as the book shows, there was still something on the table to attract the investors,” said a syndicate banker.

The new issue is Aareal’s second benchmark Pfandbrief in US dollars, following a $500m (Eu420m) four year debut in March 2015. There have been two US dollar benchmarks from German issuers this year, the most recent a $600m three year from Deutsche Pfandbriefbank in April.