Deutsche Bank this (Thursday) morning priced the sixth German Pfandbrief benchmark in just over a week, taking such supply in that period to Eu4bn, with a Eu500m 10 year issue. Meanwhile, Clydesdale debuted with a dual tranche sterling covered bond.

Deutsche Bank, Frankfurt

Leads Barclays, Deutsche Bank, UBS and UniCredit gathered around Eu1bn of orders for Deutsche’s no-grow issue and have priced the deal at 12bp over mid-swaps, the tight end of guidance of 12bp-14bp over, revised from the 14bp over area. Indications of interest were gathered yesterday (Wednesday) afternoon on the basis of initial price thoughts of the mid-teens.

A syndicate banker away from the leads said that Deutsche’s transaction was a continuation of a theme of Pfandbrief issuers being able to price deals at “extraordinarily” tight levels.

The deal follows new issues for Münchener Hypothekenbank and HSH Nordbank yesterday (Wednesday), and three Pfandbrief benchmarks last week. Münchener Hyp sold the first 10 year Pfandbrief since January, a Eu1bn issue that was reoffered at 10bp over.

A syndicate banker said that pricing 2bp wide of Münchener Hyp was a very good result for Deutsche.

“It’s a very tight print,” he said. “The strong bid for German Pfandbriefe continues. “It’s hard to say how much supply will be too much, but at the moment anything German flies.”

The distribution of Deutsche’s deal is similar to that of Münchener Hyp’s, he added. Some 70 accounts participated in Deutsche’s deal, with around half of orders allocated to German investors.

Based on preliminary distribution figures the UK and Asia took around 10% each, and Switzerland and the Nordic region 7% each, with Austrian, Dutch, and Italian accounts also in the order book. Fund managers participated to the tune of 40%, banks 29%, and central banks 25%, with the rest going to insurance companies.

A syndicate banker yesterday suggested that the timing of new issues from Deutsche is typically interesting in that the bank clearly has a view on market direction, and that for it to launch a deal potentially signalled a view that issuance conditions are unlikely to improve any time soon.

According to a lead syndicate banker the issuer had been planning to come to the market so a deal had been “on the cards”.

A banker away from the leads said that the series of Pfandbrief issues made sense given that next week is holiday-shortened and the week afterwards is the last before new Greek elections that could make investors resistant to new issues.

“German issuers didn’t need to hit the window at the beginning of the year,” he said, “but they are now getting their benchmarks out before the summer break. In terms of spreads, they have all been pretty tight, even HSH, which is always a bit of a tricky name.

“For those investors buying Bunds, it’s pretty tough,” he added, “so a pick-up of 80bp-90bp around five years is not bad if you’re looking at German risk.”

Bernd Volk, head of covered bond research at Deutsche, noted that while some market participants had considered the levels of Pfandbriefe to be “insane”, most European covered bonds trade at tighter levels versus their respective sovereigns.

Clydesdale is making its covered bond debut with a £1.1bn (Eu1.38bn) dual tranche issue split between a £400m three year floating rate note and £700m fixed rate tranche.

Leads Barclays, NAB, RBS and Santander have fixed the spread on the FRN at 170bp over three month Libor, in line with guidance, and the spread on the fixed rate tranche at 270bp over Gilts, also in line with guidance.

The deal had been well anticipated for this week, although is said to have been slightly delayed by documentation issues after having been expected to hit the market yesterday.

A syndicate banker away from the leads said that the FRN was coming around 20bp wide of where a Coventry Building Society floater was trading, and compared the fixed rate tranche with a Lloyds 2025 issue that was trading around 235bp over bid, saying that the pricing on Clydesdale’s deal reflected its inaugural nature and the “horrible” market backdrop against which it was launched.

However, he suggested that it made sense for the issuer to come this week, with public holidays cutting short next week and there being no sign of a materially better issuance window soon.