Commerzbank launched what could be the only euro benchmark covered bond this week yesterday (Monday), a Eu1bn five year mortgage Pfandbrief, as market participants prepare to head off to Vienna for annual industry events.

Commerzbank’s benchmark was its fifth Pfandbrief in its own name – the German bank having previously issued via subsidiary Eurohypo, while it has also issued an SME-backed structured covered bond benchmark in its own name. The deal is the third off a mortgage Pfandbrief programme it inaugurated in October 2013.

Leads BayernLB, Commerzbank, Credit Suisse and HSBC priced the issue at 5bp through mid-swaps, after having gone out with initial price thoughts of the low single-digits through mid-swaps and guidance of the 4bp through area.

More than Eu1bn of indications of interest were taken in the IPTs stage and the deal was ultimately sized at Eu1bn after total orders of some Eu1.5bn were taken from over 80 accounts.

Germany was allocated 60%, the Nordics 9%, the Benelux 7%, the UK 6%, Austria and Switzerland 4%, France 4%, non-European accounts 9%, and others 1%. Banks took 45%, funds 30%, and central banks and agencies 24%.

A Commerzbank official acknowledged that the amount was larger than the Eu500m benchmarks it has typically issued, but said that the Eu1bn size was nevertheless common in the market overall. He said that the five year maturity had proven popular on recent issues and also satisfied the needs of the mortgage cover pool.

The leads put the re-offer spread at roughly flat to Commerzbank’s secondary curve and several market participants away from the deal saw it slightly inside fair value – although this was seen as appropriate.

“Commerzbank decided to take advantage of the prevailing constructive environment and the meaningful spread tightening of the last weeks,” said a lead banker.

The Commerzbank official said that he was very pleased with the result and with the job the leads had done. He noted the attractive market environment but played down the influence of the European Central Bank’s third covered bond purchase programme (CBPP3).

ECB president Mario Draghi meanwhile commented on the forthcoming programme in a speech at the European parliament yesterday.

“Covered bonds share important features with ABS, and therefore are an obvious complement to an ABS-centred programme,” he said. “First, the link that is established on the issuing bank’s balance sheet between the covered bond, on the one side, and the loans that back the covered bond, on the other, is reasonably tight.

“As the prices for covered bonds are bid up, we expect banks to respond to the market incentives by originating more saleable covered securities, and thus more loans to collateralise them. Second, outright interventions in this market will complement ABS purchases by reinforcing the portfolio rebalancing channels of transmission and generating positive spill-overs into other markets and securities. This will further ease funding and credit conditions and will help the transmission of monetary policy.”