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Positive return lifts MMB, ‘healthy’ bid for LBBW 9s

A rare positive yield helped MMB SCF secure a successful second benchmark today, as its EUR500m no-grow 10 year attracted some EUR850m of demand, while LBBW smoothly executed a EUR650m no-grow nine year public sector Pfandbrief. Slovakia’s Prima banka has mandated a debut.

The French deal, for the covered bond issuer of My Money Bank, is the first positive yielding euro benchmark covered bond since July.

After an update on Thursday teeing up launch early this week, with a roadshow finishing on Friday, leads ABN Amro, BNP Paribas, Crédit Agricole, DZ, NordLB and Santander went out this morning with guidance of the mid-swaps plus 30bp area for MMB SCF’s EUR500m no-grow 10 year obligations foncières.

Around an hour later, they reported books above EUR500m, excluding joint lead manager interest, and after around two hours and fifteen minutes the pricing was set at 27bp on the back of orders over EUR800m, with demand ultimately totaling around EUR850m excluding JLM interest.

A syndicate banker away from the leads was impressed by the progression of the trade.

“It looks good, because it’s only their second trade so not everyone has lines for their name,” he said.

In September 2018, the French covered bond issuer decided to pull a debut EUR500m no-grow seven year trade after orders failed to exceed EUR400m. In October, it then successfully concluded the trade several basis points wider than its initial attempt, with a book size over EUR550m, excluding joint lead manager interest.

“This was a great transaction for them considering how their deal last year went, so congratulations!” said a syndicate banker away from the leads.

A lead syndicate banker said that the transaction was a fantastic result for the issuer.

“This is only their second covered bond and they’ve extended by three years,” he said, “and they have a lot more investors in the book, so this went really well.”

Another lead banker said the positive yield offered by MMB, of 0.11%, was “paramount” in the deal’s success – it is the first euro benchmark covered bond since July to offer a positive yield.

“It’s why we got some investors involved that we weren’t anticipating,” he said.

He noted that the issuer and its leads had been “slightly lucky” in yields having backed up since the mandate was announced on 28 August, when the deal would probably have come with a slightly negative yield.

“It was nice to be able to take advantage of the market in this way, by making an offer investors couldn’t pass on,” he said. “It got people to open lines for the name and MMB will be coming back to the market so this is very good for what’s to come.

“MMB needed a strong second benchmark, and they got that today.”

With the issuer’s 2025s quoted at 15bp, mid, and the curve worth a little over 1bp, the lead banker put fair value towards 20bp over, although others saw it a little wider. The lead banker said that setting initial guidance some 10bp wider, at the 30bp area, offered a nice headline number.

“It was nice to be able to show the progress to the EUR500m book,” he added, “a lot of investors were waiting for that in light of their previous trade, needing a degree of reassurance.”

He said there was little price sensitivity in the book – “Anyone who wanted to buy it at 30bp was happy at 27bp.”

A EUR750m nine year benchmark for Crédit Agricole Public Sector SCF was priced at 10bp over mid-swaps on Wednesday, with a yield of minus 0.187%.

The lead banker also highlighted the importance to the deal’s success of not just a pre-deal roadshow, but non-deal work done by the issuer since its debut.

LBBW extends out to nines

Leads Commerzbank, ING, LBBW, NatWest, Rabobank and Swedbank went out with guidance of the mid-swaps plus 5bp area for Landesbank Baden-Württemberg’s EUR650m no-grow nine year public sector Pfandbrief this morning. About an hour and 20 minutes later, they reported books over EUR1bn, including EUR50m joint lead manager interest, and after around two hours and 40 minutes guidance was revised to 2bp+/-1bp, will price in range, on the back of over EUR1.4bn orders. The spread was ultimately set at 1bp over, with a book of around EUR1.1bn, including EUR35m JLM interest.

According to comparables circulated by the leads, LBBW September 2025 public sector Pfandbriefe were quoted at minus 3.5bp, mid, and its January 2026 mortgage Pfandbriefe at minus 3bp, while BayernLB and Helaba 2028 and 2029 public sector paper was at minus 2.5bp-2bp. A lead syndicate banker put fair value at around minus 2bp and a syndicate banker away from the leads put it at minus 2bp to minus 3bp.

“The plus 5bp area was an attractive start and accounts appreciated it given where similar trades, like Erste Group last week, were priced,” said the lead syndicate banker – the Austrian EUR500m 10 year issue was priced at 6bp over mid-swaps on Wednesday.

“We ended up with a very healthy order book well above EUR1bn, excluding JLM, so we were quite happy,” he added.

The lead banker noted that the issuer does not normally issue in longer tenors.

“Seven years is normally the longest LBBW does, but the issuer in its public sector pool wanted to go as long as it could,” he said. “A nine year maturity with a EUR650m size might seem slightly odd in terms of what’s standard, but what’s standard for the market these days?”

The new issue yielded minus 0.218%.

Prima banka Slovensko will next Monday begin a roadshow ahead of a planned inaugural EUR500m no-grow covered bond, it was announced today. Commerzbank, LBBW and DZ will arrange the investor meetings, concluding on Wednesday of next week (September 18).