MünchenerHyp did well to price a Eu500m long six year Pfandbrief with a relatively low new issue premium today (Tuesday), according to syndicate officials, but they said that other issuers could draw little encouragement in a market that generally remains unwelcoming.

Münchener Hypothekenbank’s new euro benchmark is the first of the week, with bankers having yesterday (Monday) suggested that supply would be limited in the coming days after the only two benchmarks to have emerged last week, for SCBC and Bankinter, met with limited success.

Launching MünchenerHyp’s mortgage Pfandbrief this morning, leads BayernLB, BNP Paribas, Citi and DZ Bank skipped initial price thoughts to go out with guidance of the 8bp through mid-swaps area for the Eu500m no-grow long six year deal, moving to a final spread of minus 10bp on the back of over Eu600m of orders. The final book size was not available as The CBR went to press.

“They have done well, and less 10bp is a supportive outcome,” said a syndicate official at one of the leads.

Some syndicate officials away from the leads agreed.

“To take Eu500m out of the market at those levels is a good result in these conditions,” said one. “They can be pleased with that.”

Syndicate officials at and away from the leads said that the new issue offered a concession of 4bp-6bp, seeing MünchenerHyp’s October 2020s and April 2021s both quoted at minus 16bp, mid, although they noted that fair value is difficult to pin down with secondary levels being squeezed.

“That is priced fairly aggressively, I suppose, given how far from secondary curves most deals have been priced recently,” said the lead syndicate official.

Syndicate officials away from the leads said the new issue also offered a pick-up of around 30bp versus Bunds, noting that German covered bond spreads had widened in line with the market in recent weeks but were stable today.

However, the syndicate officials said not much can be interpreted from MünchenerHyp’s result.

“The information value of this trade for the rest of the market is limited,” said the lead syndicate official. “MünchenerHyp is an issuer apart, from most of the market at least, and that this has worked reasonably well does not imply that the market is again in good shape and ready for more.

“MünchenerHyp have fans out there that most other issuers cannot count on, and given the way the market still feels this is not a trade to set the market on fire – not that the market wants to be set on fire anyway.”

A syndicate official away from the leads he would not have advised non-German issuers to tap the market today, even though broader market conditions seemed more positive this morning.

“German Pfandbriefe do exist in their own world, to an extent, and a Eu500m no-grow trade from a name like this will always do OK,” he said. “But more generally the market still needs a longer break in issuance, so it’s nice to see things quieten down this week.”

Another syndicate official away from the leads argued the outcome was not particularly encouraging even for German issuers. He noted that there had been no book update for almost two hours after the deal went live, and suggested the trade had progressed slower and found less demand than it would have in normal market conditions.

“It is German, the maturity is fine, the name is a popular one, and the size is fairly defensive and not pushing too much, yet still this was not a massive flyer,” he said. “For me that shows the market is still fragile, even if equities and credit indices are better today.

“It is a sign the market is not fully reopen and it needs more time to rebuild. For now we will see that Germans might struggle when spreads are so close to secondaries.”

Syndicate officials said that deals remain in the pipeline, with projects from peripheral issuers in particular, but said few issuers are likely to brave the market this week.

“No one wants to put their feet in the water yet,” said one.

The new issue is MünchenerHyp’s fourth euro benchmark covered bond of the year after three Eu750m deals: a 10 year in March, an eight year in June, and a long five year in July.