Berlin Hyp will today (Tuesday) price the tightest benchmark covered bond of 2012 and only the second jumbo Pfandbrief of the year, a Eu1bn no-grow five year that was more than twice oversubscribed despite being double-A rated as accounts embraced the rare German supply.

Barclays, DZ Bank, HSBC, JP Morgan and Landesbank Berlin opened order books this morning with official guidance set at the 10bp over mid-swaps area after having yesterday (Monday) taken indications of interest in the low teens.

Well over Eu2bn of orders were placed during 45 minutes of bookbuilding and the mortgage-backed deal will be priced at 9bp, according to the issuer.

Syndicate bankers away from the deal said it was a success, noting that it is the tightest benchmark covered bond of the year. The next tightest pricing was for a Eu1bn seven year public sector issue for Landesbank Hessen-Thüringen (Helaba), which was the first jumbo Pfandbrief this year after a series of Eu500m deals from the jurisdiction. That deal was priced at 15bp over mid-swaps.

Syndicate officials noted positively that Berlin-Hannoversche Hypothekenbank was selling a Eu1bn-sized deal after having in the past often launched Eu500m transactions.

“It’s a big success,” said one. “The pricing is in line and it’s nice to see Berlin Hyp once this year and to see a jumbo. The Pfandbrief remains the benchmark.”

Berlin Hyp’s deal will take German benchmark volumes to Eu5.125bn this year, a far cry from what a syndicate banker said were some Eu40bn of redemptions. He said the transaction seemed fairly priced despite the lack of triple-A ratings.

Berlin Hyp’s mortgage Pfandbriefe are rated Aa1 by Moody’s and AA+ by Fitch, on stable outlook.

Assessments of new issue premiums were mixed, with some seeing the deal flat to Berlin Hyp’s secondary market curve and others mentioning a new issue concession of 5bp-6bp in connection with the 10bp over area.

A syndicate banker said that domestic support will have allowed the issuer to go for a Eu1bn deal despite double-A ratings of the covered bonds.

“It is remarkable that a Pfandbrief with Aa1 can walk on water,” he said.

Another syndicate official wondered whether the spread was perhaps a little bit too tight, but said the deal shows that quality issuers from core jurisdictions should not be overly unsettled by an uncertain broader market backdrop.

Some issuers were closely watching Berlin Hyp’s transaction, which could encourage further supply, but none are waiting in the wings with concrete new issue projects, it was said. Deutsche Pfandbriefbank (pbb) publishes its first quarter results today and could be a new issue candidate, said a syndicate banker.