Commerzbank sold what was seen as the tightest 10 year Pfandbrief for seven years yesterday (Tuesday), a Eu500m no-grow mortgage-backed deal that an official at the issuer said was launched on the back of ample collateral availability and went well on a busy day in the primary markets.

The new issue was Commerzbank’s third Pfandbrief benchmark of the year, in addition to an SME backed covered bond issued outside Germany’s Pfandbrief legislation in February. It is the bank’s second Pfandbrief this quarter, after an inaugural Eu500m seven year mortgage backed issue in early October.

“We have sufficient cover pool collateral and saw a good issuance window that we decided to use,” Marcel Kullmann, vice president, capital management and funding, Commerzbank, told The Covered Bond Report. “It was a well-rounded affair on an active day.”

Commerzbank announced the mandate for its deal on Monday afternoon, and was on Tuesday joined in the euro benchmark covered bond market by the UK’s Abbey National Treasury Services. Several senior unsecured deals were also out yesterday morning to make for a buzz of primary market activity.

Leads Barclays, Commerzbank, Crédit Agricole and NordLB priced the 10 year deal at 6bp over mid-swaps, after having gone out with initial price thoughts of the high single digits and then official guidance of the 7bp over area.

More than Eu700m of orders were placed for the deal, which a lead syndicate banker noted is the tightest 10 year Pfandbrief for seven years.

“The spread was great, on an absolute and relative basis,” he said. “Land NRW priced a three year shorter deal at the same spread yesterday, which shows how well bid the German Pfandbrief is.”

Commerzbank’s deal is the tightest 10 year Pfandbrief since DG Hypothekenbank and Hypothekenbank in Essen deals in the autumn of 2006, according to the lead banker.

Kullmann said that absolute yield levels helped Commerzbank’s transaction, which just hit a 2% coupon.

“Yields were 3bp-4bp higher on Monday, a bit above 2%, and on Tuesday we were fretting a little bit if the 2% would be achieved,” he said.

The 10 year maturity represents a progressive extension of Commerzbank’s curve, with the issuer having inaugurated its Pfandbrief issuance with a Eu500m public sector backed deal in June this year.

Around 50 accounts participated in the transaction. German investors took 74%, followed by the UK and Ireland with 13%, France 6%, Switzerland 5%, and the Benelux 2%.

Banks were allocated 69%, funds and pension funds 15%, central banks 9%, and insurance companies 6%.