A tightly priced Eu500m no-grow seven year Pfandbrief for Deutsche Hypothekenbank today (Tuesday) added to what has been light euro FIG supply so far this week, in contrast to a more active US dollar market that syndicate bankers said looks inviting for covered bond issuance.

Leads BayernLB, DekaBank, DZ Bank, NordLB and UniCredit priced Deutsche Hypothekenbank’s transaction, a mortgage Pfandbrief, at 4bp over mid-swaps, in line with guidance of the 4bp over area. This followed indications of interest on the basis of initial price thoughts of the “mid single digits”.

The size of the order book has not been disclosed.

A lead syndicate banker said that the market environment is not as strong as it was some five to six weeks ago, but that the leads are happy with the transaction. At 4bp over mid-swaps the deal was priced close to flat to the issuer’s secondary market curve, he said.

Syndicate officials away from the deal said that overall market sentiment has softened since last week and oversubscription levels are lower, but the primary market remains well supported, with a Eu500m no-grow deal like Deutsche Hypo’s not posing a particular challenge.

“After a weak opening yesterday sentiment is more mixed today, but tending to the softer side,” said one. “But deals are still coming with next to no issue premium and the tight level on Deutsche Hypo is testament to the strong cash position of investors.”

Another syndicate banker away from the deal said that at first sight it looked in line with expectations, and that after Münchener Hypothekenbank sold a five year at 14bp through mid-swap the level on Deutsche Hypo’s deal was not surprising.

Münchener Hyp’s deal, for Eu500m, came at the beginning of September and was the last German benchmark Pfandbrief before Deutsche Hypo’s deal today.

Another syndicate banker away from the leads said that Deutsche Hypo’s deal appeared to be coming flat to the issuer’s secondary market curve or with a 1bp new issue concession, and that although demand in the primary market remained strong initial price thoughts needed to offer a visible new issue premium.

Another syndicate banker said that Deutsche Hypo timed its transaction well, with the bid for core European paper “reigniting” as spreads consolidate following a period of heightened risk appetite that diverted investors’ attention to higher yielding bonds.

“I’m not sure if it was deliberate, but they came just when the window was turning,” he said. “I would be pushing for German supply before the risk-on mode picks up again.”

In contrast to a low-key euro primary market for FIG supply so far this week the US dollar market has played host to a series of Yankee FIG deals, with Canadian Imperial Bank of Commerce, Swedbank and Crédit Agricole yesterday (Monday) raising $1bn apiece after building healthily oversubscribed order books for a three year and two five year issues, respectively.

“Three successful dollar senior deals from non-US institutions is not something you see very often,” said a syndicate official, “but in recent weeks deals from ING, BNP and Westpac already indicated the strong bid overseas.”

And with dollar agency supply drying out the next asset class to consider is covered bonds, he added.

Another syndicate official echoed this sentiment, noting that the dollar market is looking attractive for issuers as spreads tighten and the basis swap moves in the right direction, with spread products on the whole strongly sought after.

“ANZ took advantage, RBC came and went,” he said, “but the differential between Canadian covered bonds and the cheaper names is creeping in.

“You want to issue into a market where spreads are tightening, and not when they’ve reached the bottom.”

Another syndicate official played down the prospect of issuers making any move en masse to tap the market, however.

“I don’t think anyone wants to rush,” he said. “Issuers are well-funded.”

In the UK issuers can access cheap funding via a Funding for Lending Scheme (FLS), he added, and in the euro market funding via the ECB longer term refinancing operations (LTROs) is still playing a key role, with Nordic issuers already advanced in terms of pre-funding for 2013.

“It’s difficult to see where the supply will come from,” he said.

Meanwhile, Global Bank of Panama, is tackling again a US dollar denominated structured issue that it had targeted earlier this year, and has mandated HSBC and Deutsche Bank, the same banks that were working with the issuer last time, for a roadshow that is taking place this week. The timing of any deal will depend on the response from the roadshow, according to a syndicate official involved with the project.

Global Bank has a $500m structured covered bond programme, with Standard & Poor’s in April assigning a preliminary BBB- rating to an inaugural $200m seven year issue that had been earmarked for launch off the programme.

According to S&P the covered bonds are backed by a cover pool of residential mortgages denominated in US dollars and located in Panama.