HSH Nordbank and Münchener Hypothekenbank raised an aggregate of Eu1.5bn at tight levels today (Wednesday), benefitting from a flight to quality from cash rich accounts as nerves about the periphery made for what one banker said were “ugly” broader market conditions.

The deals come against a shaky broader market backdrop, as exemplified by a new record high for the Bund future and widening of peripheral sovereign spreads. A weak auction of Italian government bonds came on top of concerns about Spain.

A syndicate official said today’s covered bond deals were “amazing prints” that provided the issuers with fantastic results, but that this was not very surprising.

Germany issued a two year Schatz with a zero per cent coupon recently, and the syndicate official said that the Pfandbrief transactions were in demand from accounts looking to invest in German paper where a pick-up is available, although another said that he would have been surprised had demand for Münchener Hyp’s deal been stronger given the low yield.

However, he said that the bad market tone was playing into the hands of Münchener Hyp and agencies, citing tight levels for the likes of Austrian infrastructure agency Asfinag and Bank Nederlandse Gemeenten (BNG). Asfinag will today price a Eu1bn 20 year at 85bp over, tightened from 95bp over, and BNG yesterday (Tuesday) sold a Eu2bn seven year at 50bp over.

Münchener Hyp is pricing a Eu1bn 10 year Jumbo mortgage Pfandbrief at 10bp over, the tight end of guidance of 10bp-12bp over, after leads Deutsche Bank, DZ Bank, Goldman Sachs, Nomura, UniCredit and WGZ gathered around Eu1.5bn of demand. The official guidance follows initial price thoughts of the low teens yesterday afternoon.

A banker involved in the deal said that all but one of the orders was at re-offer, but that although the issuer could have priced the transaction inside 10bp, it refrained from doing so.

Syndicate officials away from the leads said that Münchener Hyp’s longest dated outstanding euro benchmark, a January 2016 issue, was trading through mid-swaps, but that more recently priced Pfandbrief deals were more relevant comparables. The last 10 year Pfandbrief deal was a Eu500m issue for WL Bank in January, and a syndicate official said this was the best reference, and that the bonds were trading around 24bp-25bp over.

The pricing of Münchener Hyp’s issue was therefore overly tight in his view, he said, even though the Bavaria-based bank is a better credit than WL Bank.

“But demand determines pricing,” he added, “and the deal nonetheless worked well so congratulations are due.”

According to provisional figures from the issuer, more than 50% of the deal was sold outside Germany, with 15%-16% going to Asia, including Japan and Hong Kong. and the Middle East. Some 77 accounts participated.

A banker away from the leads described the transaction as “the Bentley trade”.

Another syndicate official said that HSH’s deal, a Eu500m four year that will be priced at 18bp over mid-swaps, was arguably the more impressive of the two given that the issuer has historically been a challenging credit to sell, with other bankers also noting that the deal went well.

Leads BNP Paribas, Commerzbank, DZ Bank, HSBC and HSH Nordbank are said to have gathered some Eu800m of demand for the no-grow issue after having gone out with guidance of the 20bp over area.

The issuer last came to the euro benchmark market not long ago, selling a five year at the end of March, and this was in the mid-20s over today, according to another syndicate official away from the leads, who said the new issue came flat to the bank’s secondary curve.