LBBW sold a EUR750m seven year Pfandbrief today (Thursday) with arguably better execution than a Commerzbank reopener yesterday, but ABN Amro 15s met with a subdued response as market conditions remained difficult. BayernLB, Crédit Agricole and UniCredit have announced deals for as soon as tomorrow.

Three new euro benchmarks today – with Bank of Montreal selling a EUR1.25bn five year (see separate article) – took issuance to EUR4.25bn in the first two business days of the year after Commerzbank’s EUR1.5bn dual-tranche reopener yesterday (Wednesday). The Canadian, German and Dutch issuers were undeterred by market conditions that remain tricky.

However, ABN Amro met with a more subdued response than previous long-dated outings from the Dutch issuer, as it sized the 15 year trade at EUR750m on the back of a book above EUR800m, pre-reconciliation, and priced the deal in the middle of guidance of the 26bp area.

A syndicate official at one of the leads said the 26bp spread offered a pick-up of 9bp-10bp over fair value. A EUR750m 15 year tranche was included in Commerzbank’s EUR1.5bn deal yesterday and attracted a similar level of demand, although the German issuer’s pricing of 19bp over was deemed to have incorporated a NIP of around 7bp.

Bankers attributed the underwhelming response to a variety of factors, but mainly to the recent fall in rates.

“Bunds are certainly at one of the highest levels of the last two years and that low on yields has certainly been in the minds of investors and caused some to stay on the sidelines,” said a syndicate banker at the one of leads ABN Amro, Barclays, Helaba, LBBW and NatWest.

A banker away from the leads agreed with this, noting that the pricing had otherwise seemed “quite fair”. Another said the mere fact there had been any 15 year issuance at all was “pretty impressive” given the “brutal” move in yields.

“I certainly don’t begrudge the fact they maybe paid a higher NIP,” he added.

The lead banker said that, based on some investor feedback, another factor was the regularity and size of the Dutch issuer’s visits to the long end of the market, where it has launched several successful trades in recent years.

“It’s fair to say that given the issuer’s history of long-dated deals of EUR1bn or more, the size probably fell a little short of expectations,” he added. “But with conditions being fairly challenging, getting this book together for a EUR750m print for ABN Amro is a solid outcome.”

Landesbank Baden-Württemberg (LBBW) tightened pricing of its EUR750m seven year mortgage Pfandbrief from initial guidance of the 6bp area to plus 5bp on the back of more than EUR1.2bn of demand. Leads Crédit Agricole, Erste, ING, LBBW, Natixis and Nordea gave a first update after around an hour and 20 minutes that orders had passed EUR600m for the euro benchmark, and set the pricing at 5bp on the back of EUR900m of demand after almost two and a half hours.

A syndicate banker at one of the leads said the EUR1.25bn book versus the EUR750m size was a “really nice” ratio, and that the issuer had made a good decision not to tighten the pricing a further basis point, to 4bp over, but to “leave a good taste, as it always does”.

He put fair value at minus 1bp, implying a new issue premium of 6bp, and noted that this was lower than the 7bp Commerzbank was deemed to have paid for its EUR750m five and 15 year tranches yesterday, while LBBW had also achieved tighter pricing for a longer maturity than its compatriot’s five year.

Looking at the four deals so far, the banker suggested the market was slowly returning to “the old times”, with less order inflation, fewer trading-oriented accounts, and hesitant investors meaning that order books are cleaner, if less oversubscribed.

“Investors are working the spreads in their favour when they can, as issuers did in the past,” he said.

“We have meanwhile seen some accounts coming in with larger orders than before,” he added, “which is encouraging.”

Three issuers announced mandates today, with launch expected as early as tomorrow (Friday).

BayernLB has mandated itself, Crédit Agricole, Helaba, ING and SG for a EUR500m no-grow six year mortgage Pfandbrief, while UniCredit Bank AG (HVB) is planning a 10 year benchmark mortgage Pfandbrief via BayernLB, Deutsche, Helaba, NatWest and UniCredit.

And Crédit Agricole Home Loan SFH is due with a 10 year euro benchmark via global coordinator Crédit Agricole, Natixis, NatWest, SG and UniCredit.

The Eurosystem was again present today in deals eligible for reinvestments of APP maturities, i.e. the Eurozone benchmarks of ABN Amro and LBBW. Lead syndicate bankers said that, as with Commerzbank yesterday, the orders were lower than the 10% typical of the last quarter of 2018, with one saying that they are now in the context of 5%.