LBBW “set the market on fire” with a €1bn 5.6 year green mortgage Pfandbrief priced closer to fair value than recent deals on the back of a book above €4.5bn today (Monday), as investors “gate-crashed” the first euro benchmark European Covered Bond of the new directive era.

Landesbank Baden-Württemberg’s deal is the first euro benchmark since a €500m four year Korea Housing Finance Corporation benchmark priced last Monday (11 July), as the primary market winds down for the summer holiday season amid ongoing volatility.

It is also the first benchmark covered bond from an issuer under the scope of the EU Covered Bond Directive, which came fully into force on 8 July.

The German deal was announced and launched this morning, leads ING, LBBW, Natixis, Nordea, Santander and UniCredit opening books with initial guidance of the mid-swaps plus 10bp area for the February 2028 green mortgage Pfandbrief, expected rating Aaa. After a little less than an hour, they reported books above €2.5bn, excluding joint lead manager interest, and after a little over an hour and a half, guidance was revised to 6bp+/-1bp, will price in range, for a €1bn deal size on the back of books above €4bn. The deal was ultimately priced at 5bp, with books above €4.5bn, excluding JLM interest and pre-reconciliation.

Some syndicate bankers were taken aback by the outcome, particularly given that new issues in recent weeks have typically paid new issue premiums of around 10bp and remained at or close to initial guidance.

“Moving 5bp from start to finish? Not too many have enjoyed that pleasure recently,” said one, “and the concession of 4bp is tighter than most. It’s also the first order book since I don’t know when that offers more than double subscription, and indeed in this case, four times the deal size.

“It’s a bit surprising how aggressively they could get this done,” added the syndicate banker. “People were gate-crashing it as if there’d be no more bonds ever again.”

Another banker said the deal had “set the market on fire”.

“It’s the right maturity, LBBW are deemed a rock solid name, they don’t come to the market too often, and it enjoys some ESG flavour,” he noted.

According to pre-announcement comparables circulated by the leads, LBBW July 2027s were quoted at mid-swaps flat, mid, on an i-spread basis, and its September 2028s at plus 2bp.

Despite the success of the new issue, the syndicate bankers said they were unaware of any further imminent mandates at this traditionally quiet time of year.

LBBW’s first euro benchmark European Covered Bond comes after DekaBank had earlier priced the first such public issue in euros, a €250m 10 year sub-benchmark public sector Pfandbrief last Monday.

Bank of Montreal (BMO) was meanwhile in the US dollar market today with a three year benchmark. Leads BMO, HSBC, Lloyds, Standard Chartered, TD and UBS went out this morning with initial price thoughts of SOFR mid-swaps plus the 82bp area for the July 2025 triple-A Canadian issue. Around the US open, guidance was set at 80bp+/-1bp on the back of some $1.6bn (€1.59bn, C$2.08bn) of demand.