Berlin Hyp was able to issue the largest single tranche Pfandbrief benchmark since February yesterday (Monday), with an official at the issuer citing a book of Eu1.2bn of demand as a highlight of the Eu750m five year mortgage-backed deal.

Having announced the mandate on Friday afternoon, leads Commerzbank, Crédit Agricole, Deka, LBBW and NordLB went out with initial price thoughts of mid-swaps plus low to mid-single-digits yesterday morning, then revised guidance to the 2bp area (plus or minus 1bp), before fixing the size at Eu750m and the pricing at 1bp over when the books were over Eu1bn.

Bodo Winkler, head of investor relations at Berlin Hyp, said that the issuer was pleased with the deal, and highlighted the level of demand relative to other Pfandbriefe launched this year, which have with only a few exceptions attracted books of under Eu1bn.

“We had a good order book in the end, with Eu1.2bn of demand, and if you remember the last German Pfandbriefe most of them had less. And it was quite granular, with around about 70 accounts in the end.

“We think it’s a really nice result.”

The only larger single tranche German Pfandbrief benchmark this year was a Eu1bn five year issue for Landesbank Hessen-Thüringen (Helaba) on 24 February. All other German benchmarks this year have been for Eu500m, although Helaba in May issued two Eu500m tranches to make a Eu1bn total issue. Berlin Hyp’s last benchmark Pfandbrief was a Eu500m seven year priced at 5bp over mid-swaps on 14 April.

In line with a strategy adopted for its last deal, Berlin Hyp announced the deal as a “benchmark”, meaning at least Eu500m, having changed tack after a Eu1bn five year issue in January 2013 had struggled to find sufficient demand. However, Winkler noted that the new issue could even have reached Eu1bn.

“If we hadn’t said that we will be doing Eu750m in the last update then it would have been possible to do Eu1bn with the strong order book we had,” he said. “But as we had limited ourselves to Eu750m it was no longer possible.

“We also want investors to have the chance for a little bit of performance afterwards and if you use the full order book the chances of this are quite limited.”

Berlin Hyp also restricted itself in its guidance to pricing above mid-swaps flat, which has been seen as something of a psychological barrier for such Pfandbriefe in the primary market.

“When we opened books we already said it will be plus 2bp area, within a range of plus or minus 1bp, so flat was not an option,” said Winkler.

Germany and Austria dominated demand with 90% of allocations, while banks took the largest share by investor type, with 71%.

“We had quite a lot in Germany,” said Winkler, “and the two strongest groups were expected to be bank treasuries and to a lesser extent asset managers because five years is a very good maturity for these two investor groups, and that was how it turned out.”

The rest of the distribution was split geographically 4% to Asia, 2% to the Benelux, 1% to Switzerland, and 3% elsewhere. Funds were allocated 18%, central banks and SSAs 6%, corporates 2%, and others 3%.

Winkler said that he would not rule out a third benchmark from Berlin Hyp this year, although it depends on several factors, including the restructuring of the Landesbank Berlin group. Under this, Berlin Hyp is owned directly by LBB Holding, which is in turn owned by the German savings banks, rather than being an indirect subsidiary of Landesbank Berlin AG, which is instead an affiliate of Berlin Hyp and being rebranded Berliner Sparkasse. Winkler noted that an asset transfer process between Landesbank Berlin and Berlin Hyp is ongoing.