Norddeutsche Landesbank (NordLB) today (Tuesday) successfully issued the only euro benchmark covered bond yet this week, a €750m 3.25 year public sector Pfandbrief in the wake of a similar Berlin Hyp trade on Wednesday, while LBBW is set to launch the latest German 10 year tomorrow.

Following a mandate announcement yesterday (Monday) morning, leads BayernLB, ING, Natixis, NordLB and UniCredit opened books with guidance of the mid-swaps plus 26bp area for a euro benchmark-sized May 2027 public sector Pfandbrief, expected rating Aa1. After around 55 minutes, they reported books above €1bn, excluding joint lead manager interest, and after around two hours and five minutes, they revised guidance to 21bp+/-1bp, will price in range, and set the size at €750m on the back of books above €1.875bn, including €150m of JLM interest. The spread was subsequently set at 20bp with orders above €2.2bn, pre-reconciliation and including €165m of JLM interest, and the final book good at re-offer was above €2bn.

“We are pretty happy with the transaction, as is the issuer,” said a syndicate banker at one of the leads. “All the boxes they wanted to tick were reached.

“The maximum deal size from the outset was €750m and they reached that. Pricing-wise, 1bp of new issue premium was a super result. And the final book good at re-offer was above €2bn.”

NordLB’s deal follows a €500m no-grow green mortgage Pfandbrief from Berlin Hyp on Wednesday, which was priced at mid-swaps plus 14bp on the back of books above €3.1bn, with demand having peaked above €4bn, and following initial guidance of the 21bp area.

“NordLB is a slightly different name,” said a syndicate banker away from both deals, “which is why they started 5bp wider and tightened to 6bp wider – I think everyone would agree that BHH is the stronger of the two names, so nothing wrong with this.

“The unknown here was the size,” he added, “as NordLB said benchmark, whereas Berlin Hyp was €500m will-not-grow. The 6bp differential may be on the wide side for the jurisdiction in the same shorter maturity, but it is what the market wanted.”

Bankers at and away from the leads put fair value in the context of 19bp. Berlin Hyp’s May 2027 green mortgage Pfandbrief was seen at 11bp, mid, according to pre-announcement comparables circulated by the leads, with LBBW April 2027s at 14bp, Helaba August 2027s at 15bp, and BayernLB January 2027s at 13bp.

“From the start we had good momentum and it is super-helpful for the rest of the trade if you are able to give a positive early update,” said the lead banker. “Of course, some accounts held their cards close to their chests waiting for the final size and spread and you had some price sensitivity, but when the final terms were set, some investors dropped their limits and we saw some new orders.

“We had a good mix of investors,” he added, “with good demand from bank treasuries and the focus was of course on domestic accounts, but we also some very nice tickets from asset managers and from foreign buyers.”

Some 64 investors were allocated bonds, with banks and private banks taking 66%, central banks and official institutions 8%, asset managers 24%, and others 2%. Germany took 71%, the Nordics 12%, Austria and Switzerland 5%, the Benelux 4%, France 4%, southern Europe 2%, and others 2%.

Fitch – which does not rate the Pfandbriefe – upgraded NordLB’s viability rating from bb to bb+ on Friday, citing stabilisation of the bank’s business profile and improving performance, resulting from significant progress in its restructuring. Its long term issuer default rating was affirmed at A-, with stable outlook.

NordLB’s 3.25 year comes after it on 4 January sold a €500m no-grow green seven year mortgage Pfandbrief at 38bp.

Landesbank Baden-Württemberg is expected with its second euro benchmark of the year tomorrow (Wednesday), having mandated DZ, LBBW, Natixis, Rabobank, Santander and UBS as leads for a €500m no-grow 10 year mortgage Pfandbrief.

The deal is set to follow benchmarks in the same tenor from MünchenerHyp on 24 January and Helaba last Tuesday (30 January), the former having sold a €500m no-grow green mortgage Pfandbrief at 34bp, and the latter having issued a €1.25bn public sector Pfandbrief at 33bp.

LBBW has already tapped euros this year for a benchmark, selling a €750m long seven year at 30bp on 2 January, which has tightened to 27bp, mid, according to pre-announcement comparables circulated by the leads this morning. Helaba’s February 2034s were meanwhile seen at 32bp, mid, MünchenerHyp’s green February 2034s at 28bp, and LBBW June 2033s were at 28.5bp.

A lead banker said LBBW’s no-grow size should help create price tension.

“And if that is what they were aiming for, then they stand a good chance of achieving their target,” he added. “I would be greatly surprised if this one caused any trouble.”

Another issuer, from a less-well represented jurisdiction, is understood to be eyeing launch tomorrow, but the primary market has otherwise been relatively quiet this week after a bumper start to the year.

“In terms of covered supply, this is most likely going to be the most feeble week of the year so far,” said a syndicate banker, “but that’s no surprise, given that we’ve seen a lot already and it’s blackout time for some, if not many.”