A EUR500m 10 year Pfandbrief for BayernLB impressed with its final spread today (Monday), landing 3bp back of a KfW 10 year, but the price wasn’t for all as the book closed at EUR730m, showing the limits of Pfandbriefe. NIBC and RLB Noe-Wien are set to issue more 10 years tomorrow.

BayernLB announced its mandate on Friday morning, for a EUR500m no-grow 10 year public sector Pfandbrief via BayernLB, Crédit Agricole, NordLB, Swedbank and UniCredit.

The deal was launched this morning with guidance of the mid-swaps minus 13bp area, and after one hour and 35 minutes the leads announced that books had exceeded EUR650m, including EUR80m joint lead manager interest. The spread was subsequently set at minus 15bp on the back of more than EUR700m of orders, including the EUR80m JLM interest. The final book stood at EUR730m.

“We think it went quite well,” said a syndicate banker at one of the leads. “An outcome of minus 15bp is a very good result, if you consider that last week we had a 10 year KfW bond priced at minus 18bp and now just days later you have a German Pfandbrief only 3bp wider.”

KfW’s EUR5bn 10 year issue, priced last Tuesday, was today seen at minus 20bp, mid.

“For some foreign investors this price is of course expensive, but we have a very nice order book with very good quality and lots of savings banks inside,” added the lead syndicate banker. “It is not super-oversubscribed, but given the spread this is a happy result.

“We didn’t expect a book of EUR1bn or so, as we are at very tight levels right now.”

Bankers noted that the move from initial guidance to the final spread and the size of the book were both smaller than had been observed in some recent deals. A EUR1bn 10 year Pfandbrief for NordLB on Thursday – the last German benchmark – was also priced 2bp inside initial guidance but attracted substantially more demand, with a final book of over EUR1.25bn, despite being lower rated and from an issuer surrounded by uncertainty negative headlines.

“That comes as a bit of a surprise, as BayernLB is clearly a better name than NordLB,” said one.

Some bankers away from the deal suggested the more modest demand for BayernLB’s trade could be a result of fatigue setting in after relatively heavy supply at the long end – with 10 of the 18 euro benchmark covered bonds sold so far this year having a maturity of 10 years or longer – and a consequence of the deal’s tight outright spread.

“It shows the selectiveness of investors and the boundaries of the Pfandbrief segment when it comes to tenor and spreads,” said one. “Comparing NordLB and BayernLB, it looks like some investors are giving less credit for the quality of the name, and would rather go for the higher basis point compensation.”

The final spread incorporated a new issue premium of around 4bp, according to syndicate bankers at and away from the leads, who cited BayernLB September 2025s at minus 22bp, mid, and January 2026s – its longest dated outstanding benchmark – at minus 21bp.

NordLB’s recent EUR1bn 10 year was priced at 8bp through mid-swaps and seen trading at around re-offer. Bankers said the differential between the spreads of BayernLB’s triple-A rated new issue and NordLB’s Aa1 10 year was in line with the differential between the two issuers’ curves.

The deal was supported by stability in rates today. Eurozone bond yields rose on Thursday and Friday of last week, with the 10 year Bund yield reaching 0.54%, its highest level since August 2017, and some market participants suggested that a more dramatic rise or any increased volatility would dampen demand for long-dated paper.

However, yields fell slightly today, with the 10 year Bund fluctuating between 0.51% and 0.53%, and bankers said the market remains conducive for longer-dated supply, even though the sweet spot for investor demand is seen in the intermediate part of the curve.

NIBC announced today that it has mandated Commerzbank, ING, NatWest, NIBC and UniCredit to lead manage a 10 year euro benchmark.

Raiffeisenlandesbank Niederösterreich-Wien (RLB Noe-Wien) also announced a mandate for a 10 year euro benchmark, via Barclays, Erste, ING, NordLB and RBI.

Both trades are expected to be launched tomorrow. Bankers away from the leads suggested that each could attract more demand than BayernLB’s 10 year as they will be priced at higher spreads.

Banco BPM this afternoon announced a mandate for a seven year euro benchmark covered bond issue via Banca Akros, Crédit Agricole, HSBC, Nomura, UBS and UniCredit.

Euro covered bond issuance is expected to remain heavy through to the end of the week, before the onset of issuers’ blackout periods takes effect.