Münchener Hypothekenbank

At least four benchmark Pfandbrief issues could hit the market next week after Germany’s Münchener Hypothekenbank reopened the benchmark covered bond market on Monday.

A public holiday in some parts of the country contributed to German banks selling only a minor share of this week’s record issuance – with a two year public sector-backed issue for UniCredit Bank AG constituting the only other benchmark Pfandbrief supply – but four mandates have been announced.

NordLB is due with its first benchmark public sector Pfandbrief issue since 2008. The 10 year deal has been mandated to Barclays Capital, BayernLB, Natixis, NordLB and UniCredit. A level of the 20bp over mid-swaps area is said to be under consideration.

Dexia Kommunalbank is planning a five year public sector Pfandbrief via BayernLB, DekaBank, Deutsche Bank, Dexia, DZ Bank, HSBC and UniCredit. Early unofficial price talk is of a 35bp over mid-swaps area level.

Eurohypo has mandated Commerzbank, Barclays, BNP Paribas, UniCredit and UBS for a benchmark mortgage Pfandbrief issue that is expected to be in the five year maturity. And Landesbank Baden-Württemberg is targeting a three year public sector-backed benchmark next week, with leads DZ, HSBC, LBBW and RBS.

Münchener Hypothekenbank on Monday launched the first benchmark covered bond of the year, a Eu1bn five year mortgage Pfandbrief priced at 10bp over mid-swaps by leads Barclays Capital, DZ Bank, LBBW, UniCredit and WGZ.

“We didn’t want to be in the market with another 20 deals,” Rafael Galuszkiewicz, head of treasury at Münchener Hyp, told The Covered Bond Report, “especially since the market was not particularly bullish.”

And he said that Münchener Hyp being the first to issue should also have benefited the wider market.

“Everyone should be happy that we were able to issue first at 10bp over in these circumstances,” said Galuszkiewicz. “That was just 2bp wider than where we issued last summer in the same maturity, when the ECB purchase programme was still operating.

“We could have priced the issue at plus 9bp as there was little spread sensitivity, but we were more focused on having a successful deal than saving the last basis point, and investors appreciated the double-digit spread. The order book was Eu1.25bn, so we were not very oversubscribed, but bear in mind that Asia and the UK were still on holiday – not even IIIA was up on Monday and we put in more work ourselves thanwe would normally have to.”

The issuer did not open books until 1230 CET given how early in the year it was tapping the market, but was still able to close books and price the issue on Monday.

A syndicate official at one of the leads said that the deal had been one of the most successful of the record-breaking week.

“Münchener Hyp is in a class of its own,” he said.

The deal was priced ahead of an inaugural Eu5bn five year issue sold by the European Union as part of its bailout of Ireland on Wednesday, with Münchener Hyp achieving a level 2bp inside the supranational. Some market participants suggested that the German bank would have struggled to achieve such a tight level had it come after the EU’s deal.

Germany took 78% of Münchener Hyp’s issue, France 5%, central and eastern Europe 4%, the Nordics 3%, Austria 2%, the Benelux 2%, the UK 2%, and others 4%. Banks were allocated 67%, asset managers 23%, central banks 9%, and insurance companies 1%.

UniCredit Bank priced a Eu1bn two year public sector Pfandbrief benchmark at mid-swaps flat on Wednesday, tightening pricing from guidance of the 2bp over mid-swaps area after attracting orders of Eu1.5bn in 15 minutes. By the time books were closed after another 15 minutes, a total of Eu1.7bn of orders had been placed.

A syndicate bank cited the rarity of both the name – UniCredit has recently been more active through its Italian covered bond issuance – and short dated Pfandbriefe as helping the deal stand out amid the flood of issuance. Commerzbank, Natixis, NordLB, RBS and UniCredit were joint bookrunners.

German investors took 82% of the paper, the Benelux 4%, central and eastern Europe 4%, Austria 3%, Italy 3%, and others 4%. Banks were allocated 67%, asset managers 25%, corporates 5%, central banks 2%, and insurance companies 1%.