LBBW attracted EUR1.37bn of orders to a EUR500m no-grow long three year Pfandbrief in just over an hour this (Wednesday) morning and could price its trade inside a slightly shorter but larger Helaba deal that came last week. SCBC has meanwhile mandated a debut green covered bond in kronor.

LBBW’s deal hit the market the morning after the UK government’s EU withdrawal agreement was resoundingly rejected by parliament, with a no confidence vote in the government due today. However, the political developments had been anticipated and markets took them in their stride, making LBBW comfortable in going out with the deal, albeit at a relatively late starting time of 9.35 CET.

“We wanted to see how the market was opening up,” said a lead syndicate banker, “and it did so positively on the risk assets side.”

He noted that away from covered bonds, Bank of New Zealand, BNP Paribas and RBC were also out with deals in the financial institution space.

Leads ABN Amro, LBBW, Santander and UniCredit opened books for the public sector Pfandbrief with guidance of mid-swaps plus 2bp, plus or minus 1bp, will price in range. Three-quarters of an hour later the spread was set at 1bp over on the back of orders above EUR800m, with the book going subject at 10.35 CET. Demand totalled EUR1.37bn from 52 accounts when the books were closed after a total of an hour and 10 minutes.

The lead banker said he couldn’t remember a book building so quickly for such a trade, taking into account the latest compliance requirements of the primary market.

Helaba issued a EUR1.5bn long three year on Wednesday of last week – as part of a two-tranche EUR2.25bn trade – but LBBW went for a longer maturity than its peer’s July 2022 because yields had fallen in the interim, according to the lead banker. The October 2022 maturity meant the guidance of LBBW’s trade implied a positive yield, albeit marginal, and the new issue was ultimately priced at a yield of 2.6bp, with a zero coupon like Helaba’s.

The middle of LBBW’s guidance was flat to where Helaba priced its new issue and the re-offer spread put it 1bp inside, which the lead banker said was because of the smaller size and LBBW being “maybe perceived as an ever so slightly better issuer”. He nevertheless said it was impressive for LBBW to come after but with a tighter spread than Helaba during a busy period.

Noting that the trade is the tightest euro benchmark of the year – only Helaba and LBBW have issued shorter than five years – he suggested that it is likely to remain the tightest of the year given the expected widening trend in covered bonds.

He put the new issue premium at 2bp, based on LBBW February 2022 mortgage Pfandbriefe at minus 1bp, mid, and August 2022 public Pfandbriefe at minus 1.5bp – ignoring a LBBW November 2022 at minus 3bp due to it having not initially been a benchmark but built up out of taps. Last week’s Helaba trade was quoted at plus 1.5bp, mid.

Germany was allocated 75.5% of the issue, the Benelux 10.7%, the Nordics 4.2%, Austria and Switzerland 3.7%, Asia 2.1%, France 2.1%, the UK and Ireland 1.0%, and others 0.7%. Banks took 48.8%, asset managers and funds 29.8%, central banks and official institutions 19.2%, insurance companies 2.1%, and others 0.1%.

The lead banker said it was good to see so much interest from asset managers and central bank-type accounts given that they are less interested in the more common longer-dated issuance.

Today’s deal comes after LBBW sold a EUR750m seven year mortgage Pfandbrief at 5bp over mid-swaps on 3 January.

Although no new euro benchmark covered bond mandates have been announced, syndicate bankers said the constructive primary market should attract further supply.

The Swedish Covered Bond Corporation (SCBC) today announced it has mandated Danske Bank, SEB and Swedbank to arrange investor meetings from next Monday to present its updated green bond framework ahead of an inaugural Swedish krona benchmark green covered bond, with a five year maturity.

See yesterday’s article for more coverage of its plans.