A Bawag PSK buyback offer ended on Tuesday, with 3.5% of a targeted Eu1bn 2014 covered bond being sold back to the issuer by investors, while any impact of a second ECB LTRO on the likelihood of further tenders is being considered.

Bawag PSK’s acceptance rate is the lowest of four cash-for-covered bond tender offers that have closed this year.

The Austrian bank was the first to offer a fixed spread, of 55bp over mid-swaps, rather than a cash repurchase price, which it on Tuesday said was 105 cents. Around Eu35m of the 4.25% 2014 covered bonds were sold back to the issuer at this price.

That compares with participation rates of 10% and 11% for two covered bonds targeted by a CatalunyaCaixa tender offer and just under 8% for a Banco BPI buyback, with a National Bank of Greece tender standing out with a 42% acceptance rate.

Bawag PSK was aiming to use the tender offer to optimise the maturity structure of its liabilities.

A banker away from the transaction noted that the premium on offer was “skinny”, at around 15bp-20bp running.

LBBW analysts said that they do not expect further buyback initiatives that are particularly aimed at generating collateral eligible for the ECB’s three year longer term repo operations (LTROs), and noted that there is little time left to free collateral via covered bond buybacks before 29 February, when the second three year LTRO takes place.

They added that an expansion of repo-eligible collateral to include certain additional credit claims on behalf of seven Eurosystem national central banks will increase available collateral by around Eu200bn (based on an ECB estimate) and give banks in these countries – Austria, Cyprus, France, Italy, Portugal, and Spain – more “room for manoeuvre”.

“We therefore do not expect further buyback programmes that are particularly aimed at creating collateral for the three year tenders,” they said.

But Mauricio Noé, head of covered bond and senior bond origination at Deutsche Bank, said he expects to see more covered bond tender offers even after the upcoming second three year LTRO.

“The three year LTRO is a good reason to do it, but the ECB will still be there after, and so will LTROs, just perhaps not for the three year tenor,” he said. “The rationale for the trade for a southern European or peripheral issuer is still there, although it is not so obvious for better quality issuers.”

An expansion of repo-eligible collateral will not reduce the incentive for covered bond buybacks, according to Noé, but rather increases the likelihood of there being a further three year LTRO and banks’ ability to carry out cash tenders.