Berlin Hyp gathered over Eu1.2bn of orders for a Eu500m five year Pfandbrief yesterday (Thursday) and an official at the issuer said the size and granularity of the order book was a highlight, noting that market conditions seem to be improving.

The new issue was the first benchmark Pfandbrief from a German issuer since a MünchenerHyp Eu500m November 2021 issue on Tuesday of last week (6 October), and syndicate officials away from the deal said the result reflected the increasing health of the market, noting that Berlin Hyp gathered substantially more demand than MünchenerHyp’s issue while coming at the same price.

Leads Commerzbank, Deka, HSBC and UniCredit skipped initial price thoughts to launch the Eu500m no-grow five year Pfandbrief with guidance of the 8bp through mid-swaps area. The leads at 10:00 CET fixed the re-offer at 10bp on the back of Eu1bn of demand, before closing books at 10:15, having gathered over Eu1.2bn of orders.

“This is clearly a very good result,” said Bodo Winkler, head of credit treasury and investor relations at Berlin Hyp. “If you compare it with the deals we witnessed last week and the weeks before, this is a very encouraging deal with an order book of more than Eu1.2bn, which was built very fast.

“We are very satisfied with this deal.”

Some 45 accounts were present in the final order book, with banks allocated 51% of the deal, fund managers 24%, central banks and official institutions 24% and others 1%. Accounts in Germany took 88%, the Nordics 5%, Switzerland 4%, Asia 1%, France 1%, and the UK 1%.

“It’s quite a diverse investor base in our order book and its granularity is appealing,” said Winkler.

He said he believes there are various reasons the deal was well received.

“The first is that the market this week is far better than in the last couple of weeks,” he said. “The second is that we as an issuer have proved in all of our last deals that we do not want to take the last basis point out of the deal, but instead want to allow investors some performance on the secondary market.”

Winkler noted that the deal was quoted as having tightened by 1bp-2bp on Thursday afternoon.

“Also, Berlin Hyp has always been very clear about its point of view towards the ECB’s purchase programme,” he said. “We prefer real money investors to artificial demand and investors know that.

“If you take the other two benchmarks we issued this year, you’ll see the allocations to the Eurosystem are relatively quite small. That is a point that is appreciated very much by real money investors.”

Berlin Hyp had been encouraged to come to the market after a Nordea Bank Finland Eu1.25bn seven year issue went well on Monday, with subsequent supply on Tuesday also well received, Winkler said.

“The beginning of this week was very positive,” he said. “Watching those deals, it was quite apparent that conditions were somehow different from the last two or three weeks.

“We still had a need for some covered funding and so we said to ourselves that if we saw the market was still functioning then we would get the deal done now.”

Winkler added that the deal would likely be Berlin Hyp’s last benchmark issue of the year.

The deal is Berlin Hyp’s third euro benchmark covered bond of the year following two Eu500m deals, the first a seven year inaugural green covered bond in April and the second a three year issue in July.