BayernLB is set to issue a EUR500m seven year Pfandbrief on Monday, its second benchmark of the year. Bankers are optimistic next week will be a good window – subject to today’s non-farm figures – after the ECB’s dropping of its easing bias yesterday (Thursday) caused little reaction.

Bayerische Landesbank announced a mandate this morning for the EUR500m no-grow public sector Pfandbrief, via leads ABN Amro, BayernLB, Commerzbank, DZ Bank and Natixis. Syndicate bankers at the leads said the deal will be launched on Monday, subject to market conditions.

“Unless something weird happens with the non-farm payrolls later today, I think we should be good to go,” said one. “We have booked our spot at the front of the queue.”

The new issue will be BayernLB’s second benchmark Pfandbrief of the year, following a EUR500m 10 year public sector issue on 15 January, which it tapped by EUR150m on 23 January.

BayernLB April 2024s and September 2025s were seen today at minus 21bp, mid, and its January 2026s at minus 22bp.

Syndicate bankers at the leads also cited as comparables 2024-2025 outstandings of LBBW, Berlin Hyp, DG Hyp, MünchenerHyp and WL Bank – all trading between minus 24bp and minus 19bp.

“What we have seen recently is that deals have priced probably 2bp-3bp wider than secondary levels, in some cases looking more at the most recent prices in the primary market rather than the issuer’s curve,” said a syndicate banker. “I’d expect BayernLB to price in around that context.”

Despite increased investor selectiveness and inconsistent demand over recent sessions, syndicate bankers are optimistic the market will be conducive next week, noting that other issuers are monitoring the market. Syndicate bankers identified the non-farm payroll figures to be released this afternoon as a potential hurdle.

“The last non-farm payroll figures caused all kinds of trouble, but the market doesn’t seem overly worried,” said one.

Markets were also calm after the European Central Bank yesterday removed its pledge that it would increase asset purchases “in terms of size and/or duration” if required from its forward guidance. The pledge had been included in the ECB’s introductory statement since 2016, and its removal was interpreted as a sign that the end of the Eurosystem’s QE programme is nearing.

However, ECB president Mario Draghi stressed that the asset purchase programme will still continue to the end of September, or beyond if necessary, and said the dropping of the easing bias was “a backward-looking decision without signals or implications for either our expectations or our reaction function”.

The move surprised many market participants, and core Eurozone government bond yields rose slightly, but the market reaction remained muted. Covered bond spreads were unmoved.