Deutsche Hypothekenbank is pricing a Eu500m no-grow five year mortgage Pfandbrief on the back of limited oversubscription today (Tuesday), with syndicate bankers noting less enthusiasm for new benchmarks priced as close to Libor as the deal’s plus 1bp re-offer level.

Leads Commerzbank, DekaBank, Deutsche Bank, Natixis and NordLB built an order book approaching Eu600m for the Deutsche Hypo deal and will price it at 1bp over mid-swaps, the middle of guidance and initial price thoughts of flat to 2bp over. Germany’s Aareal Bank yesterday (Monday) priced a Eu625m five year mortgage Pfandbrief at 1bp over mid-swaps.

Many new issues this year have been priced at the tight end of guidance, at times after large tightening moves during bookbuilding, although Norway’s DNB Boligkreditt will price a Eu1.5bn five year at 13bp over today (see separate article) after initial price thoughts of the low teens.

A syndicate official away from the Deutsche Hypo leads noted that the deal was coming at the mid-point of the guidance range, and questioned the level of enthusiasm among accounts for transactions being priced so close to Libor, with some of the issues priced at these levels having underperformed.

Investors are participating in tightly priced deals, not least in light of the lack of supply and high redemptions, he said, but some would prefer to see curve extension trades offering a bit more yield.

A syndicate banker on the deal said that the guidance reflected the leads’ desire to position the deal fairly but not give away too much spread, in part to avoid having to tighten the level during execution, and that this approach was deemed appropriate given the limited size of the deal and the state of the market.

“Market conditions are good even if the general tone is slightly softer than last week for example,” he said, “and there is still a lot of liquidity for good names, and there hasn’t been a lot of supply.

“We didn’t want to start at a wider level to then bring in the spread, and chose to start at a fair level.”

At 1bp over the deal is coming roughly flat to the secondary market, he added.

The order book was of good quality, said the lead syndicate banker. Around 40 accounts participated, roughly 15 of which were foreign.

Today’s transaction is Deutsche Hypo’s first euro benchmark since September, when it sold a Eu500m seven year at 4bp over mid-swaps.