MünchenerHyp sold a Eu750m eight year Pfandbrief today (Tuesday), attracting sufficient demand to increase the deal from Eu500m after the leads went out with what an official at the issuer described as “aggressive but realistic” guidance supported by a recent back-up in yields.

Leads DZ Bank, LBBW, UBS, UniCredit launched the eight year mortgage Pfandbrief with an initial size of Eu500m and guidance of 16bp through mid-swaps. The re-offer was set at 17bp through and the size at Eu750m on the back of an order book of more than Eu1bn, with 46 accounts participating.

“We started, as is common nowadays, with a Eu500m transaction as we were not planning to go for Eu1bn – that was pretty clear,” said Rafael Scholz, head of treasury at MünchenerHyp. “The deal was then well accepted and we had a decent order book of Eu1bn, with high quality orders, including central banks, and with nice participation from abroad.”

He noted that the issuer, as previously, skipped an IPTs stage in execution.

“We chose a different approach,” said Scholz. “The group knows where the secondary market is trading and, leaving a small premium on the table, such a deal should come at between minus 15bp and 18bp – so we didn’t see the need to start with wider IPTs.

“And, especially as we have a very interesting yield environment at the moment, we were confident in going into the market with an aggressive but realistic spread of 16bp, which we revised to 17bp in the end, leaving a basis point on the table as most of the interest was at re-offer.”

The deal was priced with a coupon of 0.5%, something Scholz said had not been possible for three to four months until the recent back-up in yields.

“At the moment the better value for investors is further along the curve,” he added, “around eight years, and we are concentrated on long dated assets in the residential mortgage lending business, so eight years is pretty fine with us. And – last but not least – that is one spot on our benchmark curve that had not been used yet, so we have now filled this with an eight year transaction, giving us a 2023 maturity.”

The deal came ahead of a Eu1.5bn MünchenerHyp redemption on 15 June and Scholz said that refinancing part of that was one reason for the issuer coming to market with the new issue.

“We also have a $500m (Eu457m) transaction which is maturing next month,” he added, “so we are looking at the foreign currency market, too, although I doubt we will go for a benchmark transaction at the moment.”

Scholz meanwhile complimented the syndicate on their work on the trade.

“We are mostly in very good transactions overall and have had nothing to complain about,” he said, “but in this deal my colleague Martin Schmid and I found the cooperation and work to be really smooth and that should be recognised.”

A syndicate official at one of the leads said that increasing the issue while printing at the tighter end of guidance and building a diverse order book was a good result after recent market uncertainty.

“This was a smooth, fast exercise,” he added.

Central banks were allocated 42.8%, banks 35.6%, and fund managers and insurance companies 21.6%. Accounts from Germany took 72.7%, the Nordics 12.7%, France and the Benelux 4%, Asia 4%, the Middle East 2.1%, Austria, Switzerland and Liechtenstein 2%, and other Europe 2.5%.

While praising the outcome, bankers away from the leads said that other issuers could not necessarily interpret much from MünchenerHyp’s execution.

“This is a German name, after all, and one of the best German names out there,” said a syndicate official. “We have seen three Pfandbriefe go well in the last week so this is no surprise.”

The new issue makes MünchenerHyp the third German issuer to have launched a euro benchmark into more stable market conditions that have prevailed since the beginning of last week, after DG Hyp priced a Eu500m nine year at 15bp through mid-swaps on Thursday and Sparkasse KölnBonn a Eu500m seven year at 16bp through on Wednesday.

Another banker suggested that core, top quality names could at least infer an idea of what an appropriate new issue premium is in current market conditions. Lead syndicate officials and those away from the deal said it offered a premium of around 3bp-4bp, seeing MünchenerHyp’s June 2022s at minus 22bp, mid, and June 2024s at minus 20bp.

“But for issuers from other jurisdictions and weaker credits things still look a lot more challenging,” said the banker. “There are a lot of names looking, but their coming forward depends on a positive outcome from Greece.”

Citing public holidays in some areas of Europe on Thursday as narrowing the window for issuance, syndicate officials said it was unlikely further euro benchmark supply would emerge this week.