MünchenerHyp today (Monday) sold the tightest 10 year benchmark covered bond, rapidly attracting Eu2bn of orders for a Eu750m deal at 14bp through mid-swaps. Nordea Bank Finland is due with a dual-tranche issue in euros tomorrow and Coventry Building Society in sterling.

Münchener Hypothekenbank leads Crédit Agricole, DZ, HSBC and LBBW launched the Eu750m 10 year mortgage Pfandbrief with initial price thoughts of the mid-swaps minus 11bp area, before tightening to guidance of the minus 13bp area with books above Eu1bn. The re-offer was then set at minus 14bp on the back of orders of more than Eu1.5bn, with the final book reaching Eu2bn, comprising 70 orders.

A syndicate official at one of the leads said than an aggressive approach allowed the leads to sell one of the tightest priced and lowest yielding 10 year Pfandbriefe ever. He said that investors responded quickly to the transaction and cited the granularity of the order book. The mandate for the transaction was announced on Friday and the trade was wrapped up in around one hour this morning.

The lead syndicate official suggested the deal offered only a very limited new issue premium, noting that a MünchenerHyp June 2024 trade, a 10 year priced at mid-swaps plus 7bp in June 2014, was trading at minus 18bp, bid. He added that the new issue was priced at 25.7bp over Bunds.

A banker away from the leads agreed that the new issue premium was very low and said the deal was very successful.

“In this spread and low yield environment, you have to do well to attract orders of more than Eu1.5bn,” he said.

The 10 year tenor was the right choice for the issuer, he added, noting that investors were drawn to the longer end of the curve in search of yield.

“It was a smart move,” he said.

Banks were allocated 48.6%, central banks 32.9%, and funds and insurance companies 18.5%. Investors in Germany took 70.2%, the Nordics 8.8%, the Middle East 5.9%, France and the Benelux 5.7%, Austria, Switzerland and Liechtenstein 4.8%, Asia 2.7% and other European countries 1.9%.

The lead syndicate banker said that the start of the ECB’s public sector purchase programme (PSPP) today had only a marginal impact on the deal, noting that its effects had already been priced in by the market.

“It didn’t feel like the trade was being supported by a bull market,” he said. “It felt like the issuer’s name helped more. Other issuers might not have necessarily been able to do this trade.”

The banker away from the leads said that the demand for the deal shows the covered bond market is still supportive and has been relative unaffected by the initiation of the sovereign QE programme.

“There has not been much of an impact for euro covered bonds,” he said. “All issuers are still welcome in this market.”

Another syndicate official away from the leads agreed.

“This deal would have looked exactly the same had it come last week,” he said. “The market is slightly up from where we were on Friday, but it is still in the same range it has been in since January.”

The syndicate official added that Nordic and Canadian issuers are looking at the market ahead of possible trades in the coming days or weeks.

“The tone is set for more supply,” he said, noting that most banks were now out of their blackout periods. “I would expect some healthy supply this week.”

Nordea Bank Finland has since announced BNP Paribas, HSBC, Nordea, NordLB and RBS as leads for a dual-tranche euro denominated benchmark split into 5.25 year and 12 year tranches.

Nordea Bank Finland last came to the euro covered bond market in October, when it priced a Eu1bn 10 year trade at mid-swaps plus 1bp, while the most recent euro benchmark from a Finish issuer was a November 2024 from OP Mortgage Bank, another Eu1bn 10 year, priced at 4bp at the end of November.

In sterling Coventry Building Society is expected to launch a benchmark five year sterling floating rate note tomorrow (Tuesday), after having today (Monday) announced a mandate. BNP Paribas, Lloyds, RBC and Santander are leads or a deal that will be coming after a UK roadshow last week that the issuer had announced as preceding a new bond issue.

Coventry last tapped the covered bond market with a Eu500m seven year deal at 3bp over mid-swaps in late October. Its last sterling covered bond was a £500m three year issue launched in February 2012 that matured last month.

DNB sold a £250m five year sterling covered bond at 28bp over Libor on 9 February. The last building society supply was a £300m three year FRN by Leeds on 2 February, which was priced at 27bp over and was today quoted at 27bp/25bp, according to a syndicate official at one of Coventry’s leads.