NordLB overcome uncertainty around the German group to draw over EUR1.25bn of demand to a EUR1bn 10 year Pfandbrief today (Thursday) as size was prioritised over spread, with investors appreciating this as well as a pick-up versus peers, said bankers. Westpac priced a £500m five year FRN.

Reports emerged last week that NordLB has decided against selling subsidiary Deutsche Hypo. Rumours first emerged last summer that NordLB was considering a sale of Deutsche Hypo, as the NordLB group tackled ongoing challenges relating to losses and shipping exposures.

“These headlines, coming even in recent days, are not ideal when it comes to launching a new trade, but nevertheless business at NordLB goes on and they are still providing material,” said a syndicate banker at one of NordLB’s leads. “At the end of the day, today’s result shows that NordLB does not have problems accessing funding through this market.”

NordLB announced a mandate for the 10 year euro benchmark mortgage Pfandbrief, via BayernLB, Natixis, NordLB, Santander and UniCredit, yesterday (Wednesday) morning.

The deal was launched this morning with guidance of the mid-swaps minus 6bp area, and after around one hour and 20 minutes, the leads announced that books had exceeded EUR700m, excluding joint lead manager interest but including the CBPP3 bid.

Guidance was subsequently revised to minus 8bp, plus or minus 1bp will price within range, with books over EUR950m, again excluding JLM interest and including CBPP3. The spread was later fixed at minus 8bp and the size at EUR1bn. The book closed at over EUR1.25bn with more than 50 accounts.

The lead syndicate banker said there was some price sensitivity in the book when the issuer indicated it was targeting a EUR1bn print, and the leads therefore priced it at minus 8bp rather than pushing on to minus 9bp, prioritising the size.

“It is good to see more larger, more liquid deals in this market, after seeing a lot more EUR500m trades last year,” he added. “That is something we saw in the book today.

“Some investors had limits relating to the deal size, and would have skipped this trade if it was only a EUR500m trade. From a liquidity perspective it is a good sign.”

Syndicate bankers noted it was unusual for lead managers to disclose whether a book update included orders made under CBPP3. A syndicate banker at one of the leads said their rationale was to show they had received sufficient orders from real money accounts to print a minimum size of EUR500m and demonstrate “that the trade was a happy one and was working well”.

The deal is the second benchmark German Pfandbrief of the year, following a EUR1bn seven year issue for LBBW on 2 January that is the tightest euro benchmark covered bond to date, having been priced 20bp through mid-swaps. That deal was seen at minus 22bp, mid, today.

Bankers noted that NordLB’s Aa1 rated deal offered an attractive pick-up versus the curves of its higher rated compatriots, estimating that fair value for a new 10 year Pfandbrief from a triple-A rated German issuer would be around minus 18bp.

“If you also compare the spread to recent triple-A rated paper from France, where we have seen EUR750m printed at minus 9bp, then the differential is good for a non-triple-A name like NordLB, printing a yard at minus 8bp,” added the lead syndicate banker.

Syndicate bankers at and away from the leads said the final spread of NordLB’s deal incorporated a new issue premium of 4bp, citing NordLB October 2026s at minus 14bp, mid, and January 2027s at minus 13bp.

NordLB’s last euro benchmark Pfandbrief was a EUR500m seven year on 28 September, while Deutsche Hyp last issued a benchmark on 16 November, an inaugural green EUR500m six year issue.

Westpac priced a £500m five year FRN at 24bp over three month Libor, on the back of £600m of orders, via leads HSBC, Nomura, RBC and Westpac today.

The Australian deal follows four sterling FRN issues last week, including two from non-domestic issuers, a £550m five year for Bank of Nova Scotia and a £650m five year for Stadshypotek, priced at 23bp and 22bp over three month Libor, respectively.

The new issue comes one week after Westpac tapped the euro covered bond market, selling a EUR1.75bn dual-tranche, seven and 15 year deal last Thursday.

Bank of Nova Scotia announced this afternoon that it has mandated BNP Paribas, Credit Suisse, LBBW, Scotiabank and UBS Investment Bank to lead manage a euro benchmark covered bond issue with an intermediate maturity. A syndicate banker at one of the leads said the deal will be launched tomorrow.