Deutsche Kreditbank sold a Eu500m no-grow 12 year mortgage Pfandbrief on Thursday and an official at the German bank said that the QE-stimulated favourable market conditions helped the issuer achieve its goal of tapping the long end and exceed pricing expectations.

DKB leads BayernLB, Commerzbank, DZ, Natixis and NordLB launched the deal with initial price thoughts of the mid-single digits through mid-swaps area, before moving to guidance of 8bp through. The re-offer was then set at minus 9bp, with the leads having built an order book of over Eu800m.

“The deal went very well,” said Thomas Pönisch, head of treasury at DKB. “We reached our desired book size after around an hour, even before the Eurosystem was looking deeper into the deal.

“And the pricing went beyond our expectations. We didn’t want to push it too far, but in the end the order book allowed us to go deep into minus territory.”

Banks were allocated 28% of the issue, asset managers and funds 28%, central banks 27%, and co-operatives and savings banks 17%. Accounts from Germany took 85%, Scandinavia 5%, Switzerland and Austria 4%, other European countries 4%, and Asia 2%.

The deal benefitted from favourable market conditions, resulting from the ECB’s expanded QE, Pönisch said, acknowledging that investors are looking for a yield pick-up at the long end of the curve.

“The market was very good,” he said, “there was no political backfire from Greece or Russia, so we decided that the time was right. We had been looking at the market for some time, and we were certainly surprised about the spread tightening, which is going so fast and so deep.

“We have proven that we have a good market position that allows us to proceed at short notice if market opportunities arise,” he added. “Although we are not one of the biggest issuers, we have a good reputation, and we do come regularly to the market, and for our size that fits very well.”

Pönisch said the issuer had prioritised a longer dated deal to refinance its long dated loans. Having issued its first 10 year benchmark in 2014 – a June 2024 trade that it tapped earlier this year – DKB was looking at issuing a longer dated Pfandbrief, he said, and was advised by the leads that a 12 year would be welcomed by the market.

“So we used this very good market environment and these very good levels to refund our loans to customers,” he said. “That is actually what banks are meant to be doing.”

While the issuer did not budget for further benchmark covered bond issuance this year, with it having only one benchmark maturing and having already met its capital markets funding requirements for 2015, Pönisch said the issuer may return to the market.

“If you would have asked me at the beginning of this year I wouldn’t have guessed that we would issue two benchmarks, but now we already have one tapped at Eu250m, and now another benchmark,” he said. “This is certainly a result of these extraordinary market conditions.

“I would never say no at the moment. If it fits in our funding plan, there might be another deal to come from us in the second half of this year, although I would think it would be a shorter maturity.”