LBBW got the third week of benchmark euro covered bond issuance off to a strong start with a €1bn long three year Pfandbrief today (Monday) that attracted more than €3.4bn of orders and achieved the tightest pricing yet this year, and heavy supply is set to continue after a bumper opening fortnight.

Supply in the past two weeks totalled €24.45bn, almost €10bn more than in the first two weeks of January last year, when €14.75bn was issued. Today’s €1bn from Landesbank Baden-Württemberg and €1.5bn expected imminently from three deals announced today should put year-to-date supply just €800m short of the €27.75bn issued across the whole of January 2022, with two weeks of this month left to go.

Landesbank Baden-Württemberg (LBBW) hit the market this morning following a mandate announcement on Friday. Leads Deutsche, ING, LBBW, Lloyds, SG, and TD went out with guidance of the mid-swaps flat area for a euro benchmark-sized March 2026 mortgage Pfandbrief, expected rating Aaa. After around three-quarters of an hour, they reported books above €2bn, excluding joint lead manager interest, and after close to two hours, they set the size at €1bn and the spread at minus 5bp on the back of more than €3bn of orders. The final order book was above €3.4bn.

“They started where Berlin Hyp did and went for size, but still tightened 5bp, which is a sign how sought-after such short-dated paper is,” said a syndicate banker away from the leads.

LBBW subsidiary Berlin Hyp sold a €500m May 2026 social issue at minus 4bp on 3 January, while DZ Hyp priced a €500m January 2026 at the same level last Monday (9 January).

A lead syndicate official said that although some bankers had not anticipated such a tight level, steering towards fair value of minus 4.5bp was justified based on the potential interest in such a new issue.

“An LBBW three year is very much the right product for most of the German-speaking clients, of course, but also the big international funds and treasuries,” he said. “So this was a very solid trade.

“LBBW has also tended to be at the shorter end lately and all the bonds have performed well, and I strongly believe that this will put in a positive showing, too – many investors were scaled back and the bond is already being bought aggressively in secondary.”

Today’s deal marks a return to form for German Pfandbriefe after a muted response to a NordLB €500m long seven year on Wednesday was followed by a €500m six year for Deutsche Pfandbriefbank (pbb) on Thursday that a lead banker said was disappointing: the last book update for the €500m no-grow deal was above €460m, including €25m of JLM interest, and it was priced in the middle of 16bp area guidance, implying a new issue premium of around 8bp. The Aa1 rating and commercial real estate cover were cited as factors narrowing the potential investor base, while the lead banker said some accounts felt it was “a bit too richly priced”.

The LBBW lead banker said that the difference in outcome between today’s deal and the last two German Pfandbriefe was not unexpected, and not only because of the differing maturities.

“Investors differentiate between core and non-core and between core Germany and core non-Germany, and in the end they differentiate between core Germans and non-core Germans,” he said. “We could have done a six or seven year as well and would have had a comparable result, even if it is a trickier for some accounts.”

Bausparkasse Schwäbisch Hall (BSH) is expected tomorrow with a €500m no-grow long nine year mortgage Pfandbrief, following a mandate announcement today. DekaBank, Deutsche, DZ, Natixis and Swedbank have the mandate.

“People do appreciate the quality of their cover pool,” said a lead banker. “This is 100% super-conservative owner-occupied residential mortgages.

“So this is the perfect name, but perhaps not the perfect maturity,” he added. “We’ll see how this balances out.

According to pre-announcement comparables circulated by the leads, BSH October 2031s were seen at 7bp, mid, and its April 2033s at 10bp, while parent DZ Hyp November 2031s were at 9.5bp and its November 2032s, a €500m deal re-offered at 13bp last Monday, at 11.5bp. That short 10 year green mortgage Pfandbrief attracted over €1.3bn of demand.

NIBC Bank is planning a €500m no-grow seven year issue via Commerzbank, DZ, ING, LBBW and NatWest. The deal will be the Dutch bank’s second soft bullet benchmark, after it switched from conditional pass-through issuance and inaugurated its new programme last June.

Those June 2027s were seen at 13.5bp, according to pre-announcement comparables circulated by the leads, while NN Bank July 2030s were at 16bp, and a lead banker estimated fair value at around 18bp.

“Seven years is not for the majority, but there are big investors who are still eager to play in what can be considered long-dated tenors these days,” said another lead banker.

Raiffeisen Landesbank Vorarlberg issued a €300m four year mortgage Pfandbrief today. Led by Commerzbank, DekaBank, Erste, Helaba and RBI, the Austrian deal was tightened from guidance of the 26bp area to be 23bp on the back of some €700m of demand good at re-offer. Syndicate bankers put the new issue premium at around 7bp.

Raiffeisen-Landesbank Tirol is next up from Austria, with a €500m no-grow five year mortgage covered bond. And DekaBank is due with the next sub-benchmark, having mandated a €250m no-grow two year public sector Pfandbrief.