Bausparkasse Schwäbisch Hall yesterday (Thursday) attracted some €1.25bn of demand to its third euro benchmark, a €500m 10 year mortgage Pfandbrief, and BayernLB is set to provide renewed supply on Monday after mandating a €500m eight year public sector Pfandbrief.

Following a mandate announcement yesterday, Bausparkasse Schwäbisch Hall (BSH) leads Barclays, DZ, Helaba, Natixis and RBI this morning went out with initial guidance of the mid-swaps plus 3bp area for the €500m no-grow October 2031 mortgage Pfandbrief, expected rating Aaa. After around an hour and 20 minutes, the leads reported books above €900m, including €145m of joint lead manager interest, and after close to two hours, they revised guidance to mid-swaps flat plus or minus 1bp, will price in range, on the back of books above €1bn. The deal was ultimately priced at minus 1bp on the back of more than €1.3bn of orders, pre-reconciliation, and the final order book was put at €1.25bn, including €135m of JLM interest and 56 different orders.

A syndicate banker at one of the leads said the German transaction went fairly smoothly.

“It wasn’t the most dynamic trade – we have seen others go through the roof,” he said, “but it was very solid and the issuer is very happy.

According to pre-announcement comparables circulated by the leads, BSH’s October 2030s were quoted at minus 2bp, mid, and its April 2033s at minus 2bp. The lead banker therefore put fair value for the new 10 year in the context of minus 2bp, noting that the issuer had left “a little something” for investors and that the approach was less aggressive than that taken by SG SFH yesterday, which achieved pricing flat to fair value on a €750m no-grow 10 year, with the book falling from a peak €2.25bn to a final €1.4bn.

“Minus 1bp was what the issuer hoped for,” he added, “even if there’s always a faint hope that you might get 1bp tighter, although I think that would have been too much this time.”

The new issue is only BSH’s third euro benchmark, since it debuted in October 2020, with its second and most recent having been a €500m 12 year in April.

“They only joined the covered bond market a year ago,” noted the lead banker, “but were apparently warmly welcomed by many investors, as apparently their cover pool is super-solid and quality seekers are in favour of the name. The flipside of this, of course, is that they are expensive in some investors’ point of view, which to some extent limits their investor universe.

“Nevertheless, it’s a €1.25bn order book good at less 1bp, which is a great response.”

A syndicate banker away from the leads agreed that BSH is seen as one of the top German names and said he thought it might have been able to come even tighter, noting that Wüstenrot Bausparkasse on Wednesday of last week (13 October) priced a €500m no-grow eight year flat to fair value.

“But it’s still an extremely good outcome,” he added, “especially since we have seen a lot of supply coming in the covered bond space, like €35bn since the reopening of the market mid-August. That they managed to get minus 1bp is a good sign that we aren’t seeing any fatigue.”

Germany was allocated 35.0% of BSH’s new issue, Asia 13.4%, Austria and Switzerland 8.2%, the Nordics 6.4%, the UK 4.0%, and others 3.0%. Central banks took 37.7%, banks 24.5%, fund managers 22.1%, agencies 13.3%, and others 2.4%.

Bayerische Landesbank is set to launch a €500m no-grow eight year public sector Pfandbrief on Monday via BayernLB, Commerzbank, ING, Natixis and UniCredit, following a mandate announcement today.

The issuer’s last euro benchmark was a €500m 10 year in April. According to pre-announcement comparables circulated by the leads, that has been trading around its re-offer level of minus 4bp, mid, while BayernLB January 2028s and February 2029s were quoted at minus 3bp.