ING-DiBa is pricing the tightest euro benchmark covered bond of the year today (Tuesday), a Eu500m maximum seven year issue that syndicate officials away from the leads said benefitted from a lack of Pfandbrief supply in a market flush with liquidity.

Around Eu2.6bn of orders were placed for the “no-grow” transaction, with leads BNP Paribas, Commerzbank, ING and Landesbank Baden-Württemberg fixing the spread at 17bp over. Guidance was initially set at the 20bp over mid-swaps area, and subsequently revised to 17bp-20bp over.

More than 100 accounts participated in the transaction, according to a syndicate banker at one of the leads.

ING-Diba, Frankfurt

At 17bp over, ING DiBa’s deal is coming at the tightest spread for a euro benchmark covered bond this year. Until today, this had been 22bp over, the level at which Deutsche Bank sold a Eu500m seven year deal nearly two weeks ago.

ING DiBa’s transaction is only the fourth new German Pfandbrief benchmark this year, leaving such supply in high demand.

“The market in Germany is screaming for Pfandbrief supply,” said a syndicate official away from the leads. “It’s great pricing for ING DiBa.”

He said that the outcome of the deal reflected supply-demand dynamics, with the pricing not necessarily reflecting “conviction on the spread versus the credit”.

However, he said that at 85bp over Bunds the deal still offered a welcome pick-up over the underlying government.

Other syndicate officials away from the leads also put the deal in the context of a lack of supply and a market pumped with ECB LTRO liquidity, with one also referring to the scarcity value of ING-DiBa’s deal. He said that the leads could have perhaps have priced the deal at 15bp over without losing orders given prevailing supply-demand dynamics.

Another said the transaction had gone very well, with pricing of 17bp over a good result. The large order book showed that a lack of supply and excess cash are having an impact, he said.

ING-DiBa’s deal came without a new issue premium, according to the syndicate banker. He said a June 2016 issue was around 12bp over mid-market yesterday, but with hardly any flows in the bond.

ING-DiBa sold its first benchmark covered bond in June 2011, a Eu500m five year that was priced at 14bp over.

The syndicate official was also encouraged by what he said was a fading of a “stigma” associated with the seven year maturity, with deals featuring such a maturity “absolutely feasible”, he said.

ING-DiBa’s deal is the fourth euro benchmark to come with a seven year maturity since the end of January, the most recent having been a Eu2bn Société Générale SFH 2019 deal last Thursday.