Deutsche Hypo guidance finds favour in calm market
Deutsche Hypothekenbank launched the only euro benchmark covered bond this (Monday) morning, a Eu1bn three year public sector backed benchmark that bankers away from the leads said looked attractively priced.
Deutsche Bank, DZ Bank, Natixis, NordLB and UniCredit opened books for the April 2014 issue at around 0930 CET and by the time The Covered Bond Report had gone to press had built a book of over Eu1bn for the Eu1bn no-grow issue.
Price guidance was set at 7bp-9bp over mid-swaps. A syndicate official away from the leads said that this was attractive for investors, and another said that he would have pitched guidance in the mid-single-digits over mid-swaps.
“It offers a decent premium to the secondary market,” he said. “But with these high quality, low spread products you cannot start with guidance too tight, but perhaps you could bring it tighter.”
He added that some SSA paper had widened recently.
The last comparable new issue was a Eu1bn September 2014 issue for Berlin-Hannoversche Hypothekenbank that was priced at 10bp over mid-swaps two weeks ago. A syndicate official at one of Deutsche Hypothekenbank’s leads said that Berlin Hyp’s deal was now re-offer bid and that the tighter spread guidance on the new issue was accounted for by the half year shorter maturity. Other secondaries were also a factor in the guidance, he added, and the deal incorporated a new issue premium.
“It’s working pretty well for a Monday,” he said. “Things are always a bit slower at the start of the week when there is less obvious direction for investors to see.”
Market participants described conditions as good, and more transactions are expected to emerge in the coming days. French banks are said to be awaiting responses from the country’s Autorité de contrôle prudential (ACP) on their applications for licences for their issuers to become sociétés de financement de l’habitat (SFHs), after which the first new obligations à l’habitat deals could be launched.