DG Hyp attracted more than Eu1.2bn of orders for a Eu500m nine year Pfandbrief yesterday (Thursday), and an official at the issuer said he would not be surprised to see other German names follow them back into a market which, he added, appears unhurt by recent volatility.

Having fixed the re-offer at 15bp through mid-swaps, Deutsche Genossenschafts-Hypothekenbank (DG Hyp) leads BayernLB, Crédit Agricole, DZ, Helaba and WGZ built a final order book of over Eu1.2bn, with more than 50 accounts participating, for the Eu500m no-grow nine year mortgage Pfandbrief.

“We feel this is a great success,” said Patrick Ernst, head of asset liability and head of treasury at DG Hyp. “In the last few weeks we obviously had quite some volatility in the market and it was hard to estimate when it would be possible to issue a covered bond again, so we are especially pleased.”

Although DG Hyp had begun preparations for a new issue last week after seeing market conditions stabilise, he said, it was encouraged by the success of a Eu500m seven year issue by Sparkasse KölnBonn on Wednesday, which was the first euro benchmark covered bond in four weeks.

“When Sparkasse KölnBonn announced their deal on Tuesday and came to the market on Wednesday, and we recognised it was going well and that investors were in a good mood for German Pfandbriefe, we knew we were on the right track and it was the right time,” said Ernst.

He noted the deal was priced in line with German Pfandbriefe issued before the recent market volatility, citing a Eu750m 10 year issue from Münchener Hypothekenbank that was priced at minus 14bp on 9 March and a Eu500m seven year green mortgage Pfandbrief from Berlin Hyp that came at minus 16bp on 27 April.

“It looks as if the volatility hasn’t hurt the German market,” he added. “I wouldn’t be surprised to see other issuers entering the market now.”

However, Ernst suggested conditions had not yet returned to normal.

“You can’t expect markets to stay like this forever,” he said. “You’ve got to take into account that the market environment could change quickly again. No one expected the market to turn so quickly a month ago.”

“For now it is business as we’ve seen it before, but you’ve got to be careful.”

With the bond seen 1bp tighter this morning, Ernst added that there was room for further performance.

“I think for us and for the investors that bought the bond, this was a good deal for both sides,” he said.

Banks were allocated 52.2% of the deal, central banks and official institutions 18%, asset managers 19.8%, insurance companies 9.1%, and retail 0.8%. Accounts from Germany took 80.6%, Austria and Switzerland 5.5%, southern Europe 3%, the Benelux 2.4%, the Middle East 2.4%, Asia 2%, France 1.7%, the Nordics 1.5%, and the UK and Ireland 0.9%.

“In all recent deals, including ours, the proportion of banks in the order books has been relatively high,” said Ernst. “But especially our new issue seems to have attracted a lot of insurance companies and asset managers, which we finally saw in the book.”

Ernst suggested the deal appealed to insurance companies and asset managers in particular due to its longer maturity, while the relative scarcity of longer dated paper contributed to the deal’s overall success.

“You might think that nine years is an odd maturity, when normally you have five years, seven years, or 10 years, but this fits perfectly with our cover pool,” he added. “We have seen a lot of seven year deals in the last couple of months, but hardly any on the longer end.

“We thought it was a good opportunity to offer the market something different.”

This year DG Hyp intends to issue another Eu1bn of covered bonds, Ernst said, with new deals most likely to come in summer or autumn. The issuer’s last benchmark was a Eu500m six year issue on 14 January.