MünchenerHyp priced the tightest ever 10 year euro benchmark covered bond yesterday (Monday) yet increased its size from usual to accommodate demand from both CBPP3 and regular buyers, according to an official at the issuer, with even new accounts participating at the historic low levels.

The mandate for the Eu750m issue hit screens on Friday morning and Claudia Bärdges-Koch, deputy head of treasury at Münchener Hypothekenbank, said that the early announcement was prompted by feedback from investors.

“We have had investors telling us that they need a bit more time to prepare internally, so we thought, why not be friendly and announce it one day in advance?” she said, “like everyone else does, albeit printing on Tuesday after being on the screen on Monday. Yes, we had the weekend in between, but it did not look like anything was going to happen and if something really dramatic had come up then everyone would have understood if we had postponed.

“And some of the investors told us they appreciated the extra time, especially given how quickly it went.”

Leads Crédit Agricole, DZ, HSBC and LBBW went out at 0900 CET with initial price thoughts of the mid-swaps minus 11bp area, then at 0930 tightened to guidance of the minus 13bp area with books above Eu1bn. The re-offer was set at minus 14bp with demand over Eu1.5bn, and books then closed at 1000.

“So we had IPTs for half an hour and about half an hour of official bookbuilding, and then we were done,” said Bärdges-Koch. “We were already beyond Eu2bn, with 70 orders out of 16 countries, so we were absolutely happy.

“And we even saw new investors at these tight levels – it’s unbelievable.”

She noted that the spread on the new issue was 21bp tighter than the issuer’s last 10 year, a Eu500m deal at 7bp over mid-swaps last June.

“But we still have a spread versus Bunds of more than 25bp if you take it like a surrogate against the Bund,” she added. “At the end of the day it’s a strange market.”

The transaction yielded 0.585%.

The deal is the largest 10 year or longer German Pfandbrief since MünchenerHyp sold a Eu1bn 10 year issue in May 2012.

“Normally we would have done Eu500m,” said Bärdges-Koch, “but we increased the size so that both sides – general investors and central banks – had a chance to buy this bond.”

Central banks were allocated 32% of the new issue, but she noted that this did not only comprise Eurosystem buying under CBPP3.

“MünchenerHyp has always had a big central bank part in all our deals, even when there hasn’t been any covered bond purchase programme,” she said. “When you look at the stats, we are not only talking about the Eurosystem, but four other central banks in the books, too.”

Syndicate officials said that the transaction tapped into demand for longer duration assets in the low yield environment, although Bärdges-Koch noted that in spite of this most recent issues had been in shorter maturities.

“So we were thought that 10 years would be better,” she said, “and it fits well into our books and our funding curve. It also made sense to lock into these spreads for a longer time.”