UniCredit has mandated for a six year mortgage Pfandbrief after Commerzbank this (Monday) morning tapped a seven year mortgage Pfandbrief by Eu500m in an encouraging start to the week after a tough two weeks and ahead of the upcoming Easter weekend.

UniCredit Bank AG has mandated BayernLB, Crédit Agricole, DZ, NordLB and UniCredit for a Eu500m no-grow six year Hypothekenpfandbrief, to be launched in the near future subject to market conditions, it was announced this afternoon

The deal will be the first benchmark issuance from UniCredit’s German issuer since it printed a Eu500m 10 year trade in April 2014. It will be the first six year from a German issuer since a January 2021 issue from DG Hypothekenbank on 14 January.

Commerzbank leads Commerzbank, DZ Bank, Crédit Agricole, Mediobanca and Natixis reopened Commerzbank’s Eu1bn January 2020 deal with guidance of the 12bp through mid-swaps area, then set the re-offer at 13bp through and the final tap size at Eu500m, on the back of books over Eu500m. The minimum size had been set at Eu250m.

A syndicate official at one of the leads said that the deal went well, in terms of the pricing and size, with another lead banker noting that the trade picked up after getting off to a slow start.

“It was not exuberant but it was a solid, comfortable Eu500m trade,” he said. “There was no need to stretch or squeeze.”

The first lead syndicate official suggested that, with the original outstanding trading at minus 16bp, bid, pre-announcement, the deal offered a new issue premium of around 3bp.

“They printed the first Eu500m part of the deal at minus 10bp in 2013, and now they’ve printed the same size at minus 13bp, so they are clearly moving up in the market,” said the second lead syndicate official.

The lead syndicate officials also said while the ECB was present in the book it was not driving the deal, adding that a diverse book and the level of demand were positive sign for the market.

“Conditions in the market last week were not brilliant, to say the least, so it was nice to start a pre-Easter week like this,” said the second.

A syndicate official away from the leads said the outcome was also positive for German Pfandbriefe after the “non-success” of a WL Bank issue last week, which was priced in line with initial price thoughts and guidance after experiencing pushback from investors.

“The Commerz tap went really well,” he added. “Eu500m for seven years is quite a success.”

Bankers meanwhile said they expect market activity to remain relatively muted this week, with Easter and school holidays approaching in many jurisdictions, but said more new trades could still happen before Thursday.

“I think we’re entering that quiet period now, with Easter coming up and school holidays kicking in and the quarter coming to an end,” said one. “But that shouldn’t rule anything out. Something could still pop up.”

Ahead of UniCredit AG’s announcement, the syndicate official said two core issuers were in talks with lead managers and looking at the market ahead of potentially launching five to 10 year benchmarks, which he said could come later in the week or after the Easter break.

He suggested issuers could now be focussing on the five to 10 year bracket, after the market had experienced a higher quantity of long dated supply and after some such deals, including the WL Bank, had struggled to take off.

Another banker, who had been one of the leads on WL Bank’s deal, agreed that the 12 year had “a maturity problem”.

“Investors are unhappy with buying in the long end,” he said, suggesting that an Aktia Bank seven year issue was the only trade to have gone well last week. “If I were an issuer I would look at how those trades went. The obvious tenor would be in the medium part of the curve. The short end doesn’t make sense because you would be getting close to negative yields and the long end is still a bit under fire.

“But the demand is still there and the week has started on a promising note, so I wouldn’t rule anything out. Had you asked me at the end of last week I would have said there wouldn’t be any deals done this week, but after Commerzbank’s result today it can be done.”