Mediobanca is pricing the tightest Italian covered bond in more than four years today (Tuesday), a Eu750m five year OBG at 51bp over mid-swaps, while Deutsche Kreditbank has announced a mandate for a Eu500m no-grow 10 year Pfandbrief, which is expected to be tomorrow’s business.

Leads Commerzbank, Mediobanca, Natixis and Société Générale opened books on the Italian deal this morning with initial price thoughts of the 55bp over mid-swaps area, before revising guidance to 53bp over area. After collecting more than Eu1.5bn of orders, the spread was fixed at 51bp over and the size set at Eu750m.

The deal is only Mediobanca’s second euro benchmark, following an inaugural, Eu750m 10 year issue in October.

A syndicate official at one of the leads said that at 51bp over no new issue premium was included, with the spread having come through fair value of the mid-50s. For comparables, the leads used an Intesa Sanpaolo 2019 trading at 44bp over, a UniCredit 2019 at 48bp, and Mediobanca’s 2023 at 82bp over.

“This is one of the tightest Italian trades we have seen,” said a syndicate official away from the leads. “It shows what Italian issuers are capable of achieving, and perhaps that they are ready to trade tighter than they have been.”

A covered bond analyst said during IPTs that, based on the Intesa Sanpaolo and UniCredit curves, the spread may be “a tad tight”, given that Mediobanca trades some 12bp wider than Intesa in the 2023 part of the curve. However, she said that from a ratings perspective and also considering where Credito Emiliano trades, the Mediobanca 2023s look relatively cheap.

Syndicate officials away from the leads felt that the pricing was appropriate, with one also noting that previous Italian issuance had perhaps been priced wider than was necessary because of weaker market conditions and that Mediobanca’s pricing strategy was more in line with what could be expected from future Italian issuance.

Deutsche Kreditbank (DKB) announced this morning that it has mandated BayernLB, Crédit Agricole, Deutsche, NordLB and WGZ Bank to lead manage a Eu500m no-grow 10 year mortgage-backed Pfandbrief. Syndicate bankers said that they expect this to be tomorrow’s business.

Depending on how the DKB deal fares, another issuer could come to market, said a syndicate official.

“The issuer wants to wait and see how DKB works out before a decision is made,” he said. “But, dependent on the success of this, there may be an additional mandate this week.”

DKB’s last benchmark was a Eu500m seven year mortgage Pfandbrief priced at 6bp over mid-swaps on 18 February, which was today quoted at 5bp over mid-swaps, according to a syndicate official at one of its leads. The last 10 year mortgage Pfandbrief was a Eu500m UniCredit issue priced at 12bp over mid-swaps on 2 April, a day after DKB parent BayernLB sold a Eu500m 10 year at 8bp over mid-swaps, which was today quoted at 6bp-7bp.

Moody’s upgraded mortgage-backed covered bonds issued by DKB on 23 May from Aa2 to Aa1, citing a reduction in the programme’s asset-liability mismatch profile.