DG Hyp priced the tightest seven year benchmark Pfandbrief of the year yesterday (Monday), a Eu500m deal that attracted the largest order book of 2014 for a German covered bond of that size, with an official at the bank saying that it delivered on the issuer’s pre-deal optimism.

Leads Crédit Agricole, Deka, DZ Bank, Helaba and WGZ priced the Eu500m no-grow mortgage-backed transaction at flat to mid-swaps, the tight end of guidance of the 1bp over mid-swaps area, which itself was tighter than initial price thoughts (IPTs) of mid-swaps plus the low single-digits.

Interest in the Deutsche Genossenschafts-Hypothekenbank (DG Hyp) bond was high from the outset, with the leads taking more than Eu1bn of indications of interest at the IPT stage, according to a syndicate official at one of the leads. When the books were closed, orders were in excess of Eu1.6bn across 66 accounts – the largest for a Eu500m Pfandbrief since Commerzbank issued a Eu500m seven year in in October, according to The CBR data.

Patrick Ernst, head of asset liability and head of treasury at DG Hyp, said that the deal was a big success.

“It was amazing to get such a large order book,” he said. “We were optimistic before going out with the deal. The market looked good and we had received positive investor feedback on the spread levels that we were considering.”

The lead syndicate official said that the success of the deal was highlighted by it having been priced tighter than recent BayernLB and Helaba bonds. He added that the infrequency of the issuer in the euro benchmark market for Pfandbrief made the bond “a target for trophy-hunters”.

The transaction was the first from the German issuer in 18 months after it in January 2013 returned to the benchmark covered bond market after an absence of six years with a Eu500m seven year issue. Ernst added that following this hiatus DG Hyp had worked on its fixed income investor relations and that this had helped boost investor appreciation of the issuer’s credit. He said that the issuer’s return to the benchmark market in January 2013 had taken into account that investors had intensified their demand for benchmark bonds instead of the private placement market.

A syndicate official on the deal said that, although the deal would have worked with or without Germany’s success at the World Cup the night before, the leads decided to give an extra 30 minutes before going out with IPTs, to allow investors more time to get into their offices.

Ernst said it would be hard to quantify the impact the match had on the deal, but said that “everyone came into work happy on Monday morning” and that this probably lifted sentiment. He noted that German dominance of the order book was not linked to the World Cup.

Germany and Austria were allocated 83% of the bonds, the Benelux 8%, Asia 4%, the UK 3%, and others 2%. Banks took 72%, central banks 12%, asset managers and funds 10%, corporates 3%, and others 3%.

Ernst said that DG Hyp intends to issue one to two benchmark covered bonds a year. He added that this is market-dependent and that the 18 month gap between yesterday’s and DG Hyp’s previous benchmark covered bonds was the result of the issuer finding attractive funding levels in senior unsecured.

“It was possible for us to get substantially low spreads in senior unsecured,” said Ernst. “So we had no need to rush back to the covered bond market. We wanted to wait for the right point.

“Our cover pool should be ready for issuance again in the second half,” he added, “and we may very well do one, but this will be dependent on us assessing whether the time is right.”