LBBW opened the 2018 euro covered bond market today (Tuesday) with the tightest ever euro benchmark, a Eu1bn seven year Pfandbrief priced at 20bp through mid-swaps. ABN Amro and CFF are set to add to new year supply tomorrow, in the 15 and 10 year maturities, respectively.

Landesbank Baden-Württemberg (LBBW) announced the mandate for its benchmark mortgage Pfandbrief last week. The German issuer was also among the issuers to launch a deal on the first days of euro issuance in 2016 and 2017, on 5 January and 3 January, respectively, and a syndicate banker at one of the new issue’s leads said the German bank announced its deal early to “stick to that tradition”.

“We were confident that we knew what the new year would look like, so we announced the deal just after Christmas just so everyone knew we were coming,” he said.

Leads Barclays, Crédit Agricole, Erste, LBBW and Natixis launched the seven year deal at 9:15 CET this morning with guidance of the mid-swaps minus 16bp area. At 10:15 CET, the leads announced that orders had exceeded Eu1bn, excluding joint lead manager interest.

Guidance was subsequently revised to the minus 19bp area, plus or minus 1bp will price within range, on the back of Eu1.5bn of orders, excluding JLM interest. The size was later fixed at Eu1bn.

The deal is the tightest ever euro benchmark covered bond, with the only other issue to be priced at minus 20bp considerably shorter – a Eu500m two year Pfandbrief for MünchenerHyp in 2012.

“It’s a very good start,” said the lead syndicate banker. “It’s the tightest name in the tightest covered bond segment coming at the tightest spread for any covered bond benchmark syndication.”

Syndicate bankers said the deal offered a new issue premium of around 4bp versus LBBW’s curve, which they noted is larger than the concessions paid on many euro benchmark trades at the end of last year.

“I was positively surprised by their approach,” said a syndicate banker away from the leads. “Most deals at the end of last year offered 1bp pick-up over secondaries at most, but at the initial guidance I saw LBBW as offering around 8bp pick-up.

“It is good for the first issuer of the year to leave some premium on the table, so I am happy with how they approached it and how the deal was received. One can definitely argue how much juice there is left at this level, but based just on LBBW’s curve, there is still a nice pick-up.”

The lead syndicate banker added that the deal offered a pick-up of around 30bp versus Bunds.

“Investors were mostly quite happy to buy into the trade even at this level,” he said.

ABN Amro announced this morning that it has mandated ABN Amro, Credit Suisse, Danske, LBBW and SG to lead manage a 15 year euro benchmark covered bond. The deal will be launched tomorrow, subject to market conditions, according to a syndicate banker at one of the leads.

Bankers said fair value for the deal will be around minus 3bp, seeing ABN Amro January 2032s and January 2037s trading at around that level, mid.

Shortly after ABN Amro’s announcement, Compagnie de Financement Foncier (CFF) announced a mandate for a 10 year euro benchmark, via leads Deutsche, DZ, Natixis, Santander and UBS.

Further euro benchmark supply is expected to be launched this week, and other French issuers are said to be among those eyeing the market.

“There are rumours of more French supply, and the French usually come to the market in the first weeks, so they would be my prime suspects to come to the market, alongside ABN Amro,” said a syndicate banker.