Münchener Hyp is pricing the tightest German Pfandbrief of the year today (Thursday), but a lead banker said the deal still drew enough demand to warrant being upsized. It also came with a pioneering sustainability rating. [Pricing comment has been corrected.]

Leads Credit Suisse, Deutsche Bank, DZ Bank, Helaba, Nomura and NordLB built an order book in excess of Eu800m and will price the deal at 5bp through mid-swaps, after having initially marketed it at the mid to low single digits through, and are sizing it at Eu625m, relative to an initially marketed “benchmark” that was seen as being for Eu500m minimum.

An official at the issuer noted that the deal is the tightest benchmark German Pfandbrief this year. According to The Covered Bond Report data, it is also the tightest euro benchmark covered bond from any jurisdiction this year. [The article was corrected after having initially contained a reference to the deal being the tightest five year German Pfandbrief since the crisis. The issuer sold a Eu500m five year public sector Pfandbrief at 14bp through mid-swaps in September 2012. ]

A syndicate official away from the leads said it was a “great achievement” to achieve such tight pricing and also be able to increase the size of the deal.

“Well done,” he said.

He put the new issue premium at around 3bp-5bp, comparing this with a larger new issue concession of some 7bp-8bp on a Eu500m five year mortgage Pfandbrief for HSH Nordbank yesterday (Wednesday). The HSH transaction was one of four euro benchmark covered bonds in the market yesterday, with Bank of Ireland, Caffil and RLB Niederösterreich also pricing deals. (See below and separate articles.)

A banker at one of the leads noted that demand was not limited to coming from “the usual suspects in the central bank arena” but also came from bank treasuries, despite the comparatively small spread on offer.

According to the issuer, Germany took 55.6%, Asia 12%, Austria and Switzerland 10.1%, Nordics 8.8%, the UK 6.7%, France and the Benelux 5.2%, and central and eastern Europe 1.6%. Central banks were allocated 44.5%, banks 34.2%, fund managers 19.2%, and insurance companies 2.1%.

Rafael Scholz, head of treasury at Münchener Hypothekenbank, highlighted that the settlement date of today’s new issue (4 October 2013) matches that of a Münchener Hyp Eu1.35bn jumbo Pfandbrief. He said that the issuer, helped by a positive market environment, felt comfortable pursuing what he described as “a rather unusual refinancing strategy” and that today’s deal partly replaces the maturing jumbo. The move was planned and prepared well in advance, added Scholz, but for settlement date reasons the issuer had to wait until today to launch the deal as there was no cover pool collateral available until some is released in connection with the jumbo maturity next Friday.

An analyst said that the redemption of Münchener Hyp’s Eu1.35bn next Friday should support the performance of today’s new issue.

In what is thought to be a first in the covered bond market, the Münchener Hyp deal announcement advertised a sustainability rating from a research and consultancy firm, imug. The rating, “positive”, is of the new issue. Münchener Hypothekenbank has a bank sustainability rating from Oekom research.

Claudia Bärdges-Koch, deputy head of treasury at Münchener Hyp, said that it is observing increasing investor interest in sustainability ratings, and that the imug rating was added to the deal announcements in response to feedback from investors.

Raiffeisenlandesbank Niederösterreich-Wien (RLB NOe-Wien) yesterday priced a Eu500m no-grow seven year mortgage backed issue, a fundierte Bankschuldverschreibung, at 10bp over mid-swaps, the tight end of guidance of 10bp-12bp over.

Leads Crédit Agricole, DZ Bank, JP Morgan, LBBW, and RLB NOe-Wien built an order book of some Eu1.5bn comprising 80 accounts in one hour yesterday morning, according to a syndicate official at one of the leads. He said that despite not having gone out with any price whisper when announcing the deal on Tuesday the leads had received feedback suggesting that the Eu500m would be easily covered.

The issuer roadshowed ahead of the new issue and the banker said that the response from investors had been promising, with Austria being perceived as a core European country and RLB NOe-Wien generating interest despite being a smaller issuer.

He said that the issuer could have achieved pricing inside 10bp over, but had made it clear from the start that pricing should be within a 10bp-12bp range to demonstrate an investor-friendly approach. The best comparable was considered to be fellow Austrian Erste Bank, he added, with a hypothetical new five year Erste issue seen coming in the high single-digits over.

A syndicate official away from the leads said that the RLB NOe-Wien deal, like the others in the market yesterday, was well-received, and that other recent Austrian benchmarks had been more challenging.

Germany was allocated 61% of the deal, Austria 16%, the Nordics 8%, the Benelux 7%, the UK and Ireland 4%, France 2%, southern Europe 1%, and others 1%. Banks took 79%, funds 12%, central banks and official institutions 4%, insurance companies 2%, and others 3%.

HSH Nordbank priced a Eu500m no-grow five year mortgage backed deal yesterday at 18bp over mid-swaps, following guidance of the 20bp over area.

Over Eu1bn of orders were gathered by leads BNP Paribas, Deutsche Bank, HSH Nordbank, NordLB and UniCredit. More than 60 individual accounts participated, according to one of the leads.

Germany and Austria took 73%, the UK 13%, France 7%, Switzerland 3%, Italy 3%, and others 1%. Banks were allocated 80%, funds 16%, insurance companies 3%, and others 1%.