Bayerische Landesbank (BayernLB) hit screens today (Wednesday) with plans for a Eu1bn deal that is expected tomorrow, while LF Hypotek has mandated for a roadshow. Other candidates for euros have been cited, although dollar levels could have implications for these.

The Munich based German issuer mandated BayernLB, Credit Suisse, NordLB, SG CIB, and UniCredit for a new public sector backed, long three year issue. A syndicate official at one of the leads said pricing would probably happen tomorrow.

BayernLB, Munich

“We just wanted to announce it today,” he said.

A price whisper of the high single digits has already emerged, loosely based on comparables such as outstanding BayernLB paper and also KfW isssues. BayernLB has a long five year trading at 7.5bp over and a three year in the low single digits.

“So the mid to high singles makes sense,” said the banker.

Länsförsäkringar Hypotek (LF Hypotek) announced plans for a roadshow yesterday (Tuesday), with leads HSBC, Natixis, Nordea, UBS and UniCredit. The Swedish issuer is expected to embark upon the roadshow next Monday.

“Personally, I think it’s a good time to issue because the market is only going to get more negative,” said a banker away from the leads. “Investors have this cash that is ready to be put to use.”

A market participant speculated that alongside names and jurisdictions that have already been mentioned, there could be supply from countries including Italy and Canada.

“It’s just speculation, but I wouldn’t be surprised to see UniCredit looking to do a 10 year,” he said.

Any Canadian issuance in euros would mark a sharp change in direction after their reliance on the US dollar market since the beginning of last year.

“We may also see one or two Canadian issuers tapping the euro market in the next month,” he added. “There is no hard evidence, but we know Canadian banks are quite happy with the compression of spreads.

“If such spread compression continues, then any of them could issue because they all have an interest in expanding their European investor base.”

But another market participant said that it made no sense for Canadian issuers to turn to euros given the tight funding levels they have been achieving in the dollar market.

“The Canadians have done extremely well to make themselves the gold standard in the US,” he said. “Over time I believe that European investors will also fully understand the advantages of Canadian covered bonds and they will tighten more.

“But the Canadians’ dollar issuance is equivalent in Euribor terms to where Germans trade and they are not going to match that.”

A syndicate official said that Canadian covered bonds have tightened slightly in dollars after the launch of a consultation paper was released by Canada Department of Finance last Wednesday. He added that the wider covered bond sector had performed well in dollars.

“We’ve seen a reasonably strong performance in the secondary market over the course of the last few weeks, which is partially driven by a lack of supply,” he said. “Names such as DnB Nor and Swedbank are 3bp-4bp tighter over the past week.”

This could bode well for Credit Suisse, which has been roadshowing in the US ahead of a debut dollar covered bond.