Berlin Hyp issued a Eu500m seven year mortgage-backed Pfandbrief this (Monday) morning in a “choppy” and “volatile” market following weekend headlines linked to an escalation of the situation in Ukraine, and the approach of Easter is expected to restrain supply this week.

Leads Commerzbank, Credit Suisse, DZ Bank, JP Morgan and LBBW went out with initial price thoughts of mid-swaps plus mid to high single-digits. Following what one syndicate official away from the deal described as a slow bookbuild the leads went out with guidance of the 7bp over mid-swaps area with indications of interest above Eu500m. The re-offer spread was then set at 5bp over on the back of a Eu700m order book, with the books ultimately closing at Eu800m.

A syndicate official at one of the leads put the new issue premium at 2bp, citing an outstanding Berlin Hyp February 2018 trading at minus 6bp and a Deutsche Kreditbank Eu500m seven year that was priced at 6bp over in February and was bid at the re-offer on the secondary market this morning. [New issue premium corrected.]

“Berlin Hyp has a stronger name than DKB, so pricing through that deal is logical,” said the syndicate official. “We have seen a lot of seven years and the Ukraine situation has not been the best situation to wake up to when planning to issue, but investor feedback has been strong enough to show there is no major concern.”

A syndicate official away from the leads attributed the slow momentum to an air of “caution” following political developments in Ukraine. Another syndicate banker away from the deal backed up this view, but noted that “Monday mornings are often a bit slow because of weekend headlines”. He added that the level appeared attractive, but suggested that the leads followed investor feedback following a roadshow that Berlin Hyp completed last week.

“Berlin Hyp secondaries are trading way too tight, so it’s tough to say what fair value is and assign a new issue premium,” he said. “Its outstanding 2018 bonds, which were barely subscribed and came 1bp through, are now at minus 7bp, so there is quite a steep curve between this and the 2018s.”

Berlin Hyp’s February 2018 issue was its last benchmark, a Eu1bn deal priced at 1bp through mid-swaps. It was tapped for Eu125m in October at 9bp through mid-swaps.

Syndicate officials away from the new issue were united in their view that the market was in a weaker shape this morning, and expected this to carry through the week in the lead up to Easter weekend with little to nothing in the pipeline.

“The market is weaker, but deals can be done, which is why Berlin Hyp pulled the trigger this morning,” said a syndicate banker. “Because of Easter this week will be front-loaded.”

Another syndicate banker, while noting that the market for covered bonds looked set for a quiet few days this week, said that he was aware of a further euro benchmark issue being contemplated for before the Easter break.