Helaba attracted solid demand to print a Eu1bn four year issue at a minimal new issue premium today (Wednesday), with another German issuer expected tomorrow and more eyeing the shorter end of the market. RBC, meanwhile, sold a $500m three year FRN yesterday.

Helaba’s short dated issue followed a Eu500m three year from Berlin Hyp yesterday (Tuesday), which was cited as attracting impressive levels of demand considering the low prevailing yields, and syndicate officials said more German deals are likely to follow in the same part of the curve.

Another German name is expected to come to the market tomorrow (Thursday) with a deal featuring a maturity of around five years, while two more are said to be monitoring the market – one considering a three year deal and another an issue with a maturity of five to seven years.

“Now is the time for other issuers to follow,” said a syndicate official.

Landesbank Hessen-Thüringen leads Commerzbank, Helaba, HSBC, Natixis and UBS launched the Eu1bn four year Pfandbrief – the issuer’s third euro benchmark of the year – with initial price thoughts of the mid-swaps plus low teens. Guidance was set at the minus 14bp area, plus or minus 1bp, before the re-offer was set at minus 15bp. The books closed at over Eu1.5bn.

“To take out Eu1bn in four years at minus 15bp, especially considering there is this spread smile at the shorter end of the curve, is a success for them,” said a syndicate official away from the leads.

Fair value for the new issue was put at minus 18bp-16bp, based on the issuer’s secondary curve, according to bankers away from the leads. One cited the issuer’s April 2019s as trading at minus 16bp, bid.

“That concession is in line with the most aggressive new issue premiums that we have seen for German Pfandbrief recently, and to price at that level and print Eu1bn is a very solid result,” he said.

The syndicate official added that at current levels issuers could print three years and still offer some yield – with Berlin Hyp’s deal yesterday offering 0.065% – and he calculated Helaba’s new issue should offer around 15bp of yield.

“These deals show that German Pfandbriefe are working well in that part of the curve,” he said. “It is an interesting opportunity.”

Sven Schukat, head of treasury at Berlin Hyp, noted that half of its deal – which attracted over Eu1.5bn of orders from 40 investors – was allocated to accounts from outside Germany, the biggest international distribution the issuer has had for a benchmark Pfandbrief.

“We are delighted that, following the issue of our Green Pfandbrief in April, we were once again able to generate strong demand,” he said. “The 50% share of foreign investors signifies a new top rate.

“Even in the current climate of sustained low interest rates, many investors are enthusiastic about our bonds. This shows the importance of intensive customer relations care precisely in such market phases.”

Besides the three German names expected to join the market, syndicate officials predicted a busy end to the week, noting that shorter dated deals from other jurisdictions had also gone well.

“Ten to fifteen years still look tricky,” added one, “and for now the main sweet spot remains in the belly of the curve.”

Another syndicate official suggested French issuers would be likely candidates to follow, noting there has been no French benchmark supply since a Eu500m three year club-style deal from Cafill on 9 July.

After Helaba’s new issue, euro benchmark covered bond supply stands at Eu9.75bn for the month.

“In little over one week’s time, primary market activity in covered bonds managed to make this year’s July the heaviest month of July of the past six years,” said Maureen Schuller, covered bond strategist at ING.

Before Helaba sold its new issue this morning, Schuller noted that, at Eu9.25bn, supply was already approaching the Eu10.3bn printed in July 2006 and July 2007. Only in July 2009 has benchmark supply surpassed those levels, she said, with Eu18.5bn printed following the launch of the ECB’s first covered bond purchase programme.

Meanwhile, Royal Bank of Canada leads HSBC and RBC priced the $500m (Eu460m, C$649m) no-grow SEC-registered three year FRN at 30bp over three month Libor, in line with guidance, after launching with initial price thoughts of the low 30s.

A market participant noted that activity in the dollar market had increased this month after a lull in supply, with four deals – including also a Westpac $800m three year FRN priced at 30bp over three month Libor, a $1bn five year from CBA and a $1.2bn five year from CIBC – launched since 7 July.

“We haven’t seen many FRNs recently until now,” he said, “but there’s been a strong bid of late and issuers are taking advantage of that.”

“That market continues to offer cost effective funding for some borrowers,” he added. “For the most part the levels in five years are better for Aussies in dollars, while for Canadians they are flattish to euros.”

The new issue is RBC’s fourth benchmark of the year, coming after a Eu1bn seven year deal on 10 June and a £400m three year on Tuesday of last week (14 July), while its last US dollar issue was a $2bn five year in January.