NordLB today (Wednesday) offered the first substantial euro benchmark supply in almost three weeks, tapping by Eu500m a four year issue that had been trading at a negative yield, but bankers suggested a slim premium contributed to modest demand.

Leads BayernLB, HSH Nordbank, Natixis, NordLB and UniCredit reopened NordLB’s Eu500m four year deal with guidance of the minus 16bp area, before fixing the re-offer at 16bp and setting the size at Eu500m after having built an order book of over Eu500m including lead manager interest, according to bankers away from the leads. The original Eu500m benchmark was issued on 12 February at 18bp through.

A syndicate official at one of the leads said the tap offered a 1bp new issue premium, and calculated that, before pricing, the deal had a yield of around 8bp-9bp.

A syndicate official away from the leads noted that the deal had recently been trading with a negative yield, before rates backed up sharply. However, he questioned whether the fact the issue was now trading with a positive yield was sufficient to entice investors, suggesting this might have contributed to what he considered to be a modest level of demand.

He also suggested that the pricing had been too aggressive, also putting the new issue premium at around 1bp, noting that the original issue had been quoted at minus 17bp-18bp, mid.

“That it is trading at a positive yield is in favour of reopening,” he said, “but with a very low premium does it make a strong case for investing? The idea was good, but I don’t think you can get away with not paying a substantial new issue premium in this market.”

Meanwhile Kreissparkasse Köln, with a selling group comprising LBBW and WGZ, today priced its Eu250m no-grow eight year deal at 7bp through mid-swaps, after having set guidance at the 7bp area plus or minus 2bp.

A syndicate official at one of the sellers cited strong granularity in the order book, noting participation from German savings banks and fund managers alongside central banks.

“We are very satisfied with this result,” he said.

The syndicate official suggested the new issue offered a premium of around 2bp to 3bp if its sub-benchmark size is adjusted for, noting a premium paid on a Eu250m five year issue printed by Ålandsbanken yesterday (Tuesday).

“If you look at Ålandsbanken’s sub-benchmark, they also paid double-digits over normal Finnish covered bonds,” he said. “The smaller size drastically reduces the universe of investors that will look at the deal, so you have to account for that.”