BayernLB placed its second sub-Eu1bn public sector benchmark yesterday (Thursday), a Eu500m 10 year issue that was priced at the tight end of guidance and attracted over Eu700m of orders a day after German peer Münchener Hypothekenbank sold a Eu750m eight year.

Leads BayernLB, Crédit Agricole, ING, Natixis, and UniCredit priced the deal at 11bp over mid-swaps after having gone out with initial price thoughts in the low to mid-teens, and guidance of the 12bp area.

Stefan Hauser, vice president, funding execution at Bayerische Landesbank, said the choice of the Eu500m size reflected the recent trend of issuers preferring smaller deals to large jumbos, as smaller sizes allow for more flexibility to tap the market more frequently when opportunities arise.

Favourable market conditions prompted the transaction, with turbulence that followed the Italian elections and the Cyprus bail-in seemed to have quietened, said Hauser. Also encouraging was the positive outcome of other covered bond transactions earlier in the week, he added, including a Eu750m 8 year deal launched by Münchener Hypothekenbank on Wednesday. MüHyp’s Pfandbrief was priced at 3bp over mid-swaps and attracted Eu900m of orders.

“The success of the MüHyp transaction gave us the confidence that there was strong demand for a German Pfandbrief issue,” he said.

Priced at 11bp over, the deal allowed for a couple of basis points of new issue premium compared with BayernLB’s outstanding Eu500m July 2022 issue, according to Hauser.

The 10 year maturity was targeted as it fit the bank’s liquidity profile, he added.

“Our aim was to increase the duration of our funding, rather than to increase liquidity overall,” he said.

The issue attracted more than Eu700m of orders, mainly from German accounts, but also with a notable presence of Asian investors, said Hauser.

Some 65 accounts participated in the transaction, Germany taking 65%, Asia 9%, the UK 6%, Switzerland 5%, Luxembourg 4%, France 4%, the Nordics 3%, Italy 2%, and others 2%.

Saving banks and Landesbanks were allocated 32%, other banks 29%, asset managers 21%, insurance companies 9%, and central banks 9%.