LBBW sold its first euro benchmark in nearly a year yesterday (Thursday), with an official at the bank saying that the timing was appropriate given that it had published its first quarter results on Tuesday and updated its programme a couple of weeks before, and following the success of a Berlin Hyp transaction earlier this week.

The deal was LBBW’s first benchmark since July 2011, when it sold an inaugural sub-jumbo mortgage Pfandbrief at 18bp over mid-swaps that was also the last six year euro benchmark before the issuer again tapped that maturity.

Jörg Huber, head of funding and investor relations, treasury, at Landesbank Baden-Württemberg, said that the issuer decided at quite short notice to come to market.

“The bank is quite well funded and as a result of that we could sit back somewhat over the past couple of months,” he said. “We issue private placements on a daily basis but with benchmarks we were very cautious.

“After Berlin Hyp did a successful transaction we felt there was a window available, and because these don’t necessarily stay open for very long we decided on Wednesday to go ahead with a deal.”

An issuance opportunity had presented itself before Easter, he said, but the issuer was not able to take advantage of this and markets were shaky thereafter, with the bank then also in blackout because of an update to its programme.

“We were also not in a rush, so we could sit back,” he said, “but then decided that now was the right time after having completed our programme update two weeks ago and released our first quarter figures just two days ago.”

The deal was announced yesterday morning, with leads Crédit Agricole, HSBC, ING and LBBW moving to collect feedback based on initial price thoughts (IPTs) of the 10bp over mid-swaps area, which Huber said was felt would provide enough momentum to bring in the pricing.

A lead syndicate official noted that although markets were still volatile after an EU summit on Wednesday, scarcity value combined with high benchmark Pfandbrief redemptions of some Eu18bn in the first quarter supported a smooth bookbuilding process.

Official guidance was set at 7bp-9bp on the back of positive feedback from the IPT process, with 90 accounts placing more than Eu2.1bn of orders, according to the syndicate banker.

The deal was re-offered at the tight end of guidance to mark the tightest pricing of a euro benchmark covered bond this year.

Huber said that the issuer was not able to be flexible on the deal size – it was capped at Eu500m from the outset – because although the issuer had sufficient collateral for this size, it did not want to do more for ALM reasons.

“We might in future be able to do a Jumbo, but we are quite careful not to overstretch the collateral that is available in a given maturity,” he said, “and this speaks to the quality of our Pfandbrief.”

At a time when quality debt is scarce, he added, investors are drawn to Pfandbriefe, with the pricing of 7bp over for a six year LBBW Pfandbrief compared with 18bp over for a three year EFSF offering evidence of this.

Germany took 63% of the bonds, Asia 10%, the Nordics 9%, Switzerland and Austria 6%, the UK 6%, the Netherlands 2%, Italy 1%, France 1%, and others 1%. Banks were allocated 39%, funds 24%, central banks 19%, insurance companies 17%, and retail 1%.