Landesbank Baden-Württemberg announced on Wednesday that it has bought back €1bn of Pfandbriefe, having upped the cap on a tender for six issues launched the previous week in conjunction with a new €500m benchmark, in the largest covered bond buyback by volume since 2020.

On 23 February, LBBW launched the tender for up to €750m of a mix of mortgage and public Pfandbriefe in maturities ranging from November 2026 to July 2029 totalling €4.65bn. Caps for individual lines were set to ensure retention of ECB/LCR and index eligibility.

The German bank also went out with a €500m no-grow eight year public Pfandbrief in its first benchmark since May 2025, when it issued a €500m 10 year public Pfandbrief.

LBBW first engaged in a liability management exercise two years ago, for its Additional Tier 1 (AT1) issuance, and turned to it again when looking at its funding programme for this year and liability structure, according to head of funding Martin Rohland.

“On the AT1, we had a different target, which was to keep investors in the credit and derisk the new issue,” he told The CBR, “but at the end of the day, it was helpful in opening up a new tool for us to use.

“When we looked at our liquidity position coming into this year, our numbers are a bit smaller than last year, when – including Berlin Hyp – we were quite active, so we thought, how can we pro-actively manage this?”

The bank therefore targeted the six short-dated benchmarks, while issuing a new longer dated transaction.

“It’s an optimisation of the bank’s liquidity stack and its structural liquidity position,” said Andreas Wein, head of funding and debt investor relations at LBBW. “We felt that we could make use of the current market environment to do this and also return after having been absent since May last year.”

The new €500m no-grow February 2026 issue, rated Aaa, was priced at mid-swaps plus 22bp on the back of a book of some €1.18bn (including €175m of joint lead manager interest), following guidance of the 27bp area.

Forty-eight accounts were allocated, 55% going to banks, 22% to central banks and official institutions, 18% to asset managers and fund managers, 4% to insurance companies and pension funds, and 1% to other investors. Germany, Austria and Switzerland took 57%, the Benelux 18%, the Nordics 8%, southern Europe 7%, the UK and Ireland 5%, and other 5%.

While the market was not experiencing the heady order books of the start of the year – when LBBW might historically have been expected to hit the market – the bank was able to tap into attractive levels with its new issue.

“We started the year with a very comfortable liquidity position,” said Wein, “hence, we had no need to be first out of the blocks. We kept monitoring the market and saw that spreads were only going in one direction, and at the end of the day managed to issue at pretty much the lowest day of the year so far – although you could say that was as much down to luck as skill.”

The market subsequently softened as Israel and the US attacked Iran, with estimates last week suggesting LBBW might have had to pay 4bp more for such a new issue in the wider market, which saw no new euro benchmark covered bond issuance. The new issue was nevertheless stable at or slightly inside re-offer, according to Rohland.

The tender offer closed last Tuesday and, with €1.049bn of bonds (23%) tendered by investors, LBBW decided to buy back as much as €1bn, 95% of the tendered amount and 22% of the outstandings.

“We included a wide range of short dated paper – some of it above par, some below – to give the biggest audience the chance to participate,” said Rohland, “and we were quite pleased that it was not all skewed in one direction or the other.

“Some of the investors who tendered took the premia so they could buy some new, longer dated paper, while others used the money for different purposes.”

He noted that the Iran war did not have any noticeable impact on the conduct of the liability management exercise.

“It was definitely a greater success than we would have hoped for or expected,” added Wein, “so we are extremely pleased. It also shows a good mutual engagement with the large professional investors who were active in both legs of the transaction, which can only be conducive to business with them going forward.”