BayernLB built a diverse Eu690m order book for a Eu500m seven year deal today (Tuesday) despite swap levels making the market challenging for German issuers, according to bankers, while SEB’s German subsidiary sold a Eu250m three year sub-benchmark with a barely positive yield.

BayernLB leads BayernLB, NordLB, Société Générale and UniCredit launched the Eu500m no-grow seven year mortgage Pfandbrief with guidance of the 7bp through mid-swaps area. The deal was re-offered at 8bp through with the books at Eu650m. The final order book was Eu690m with 35 accounts.

“This has gone very well,” said a syndicate official at one of the leads. “The days where you can tighten a Pfandbrief by 4bp-5bp are over, so to get these books and tighten the deal by 1bp is fantastic.

“In particular, we are happy with what is a very high quality order book, with good participation from real money accounts and central banks outside Europe.”

Central banks and official institutions were allocated 53% of the deal, Landesbanks and savings banks 22.5%, banks 12.5%, and asset managers and insurance companies 12%. Accounts from Germany bought 79.7%, the Benelux 11.3% and Asia 9%.

A syndicate official away from the deal agreed that the deal had gone well.

“This looks a reasonable achievement,” he said. “If you assume that CBPP3 participation in the deal is in line with other recent issues then it looks as though you have here a deal that could have been done without the ECB bid.”

Syndicate officials said that German issues had been among the weaker deals of recent weeks, citing Eu500m five year issues from HSH Nordbank on 12 November and pbb last Friday that were both priced in the middle of guidance with book sizes not disclosed.

“Obviously BayernLB is a very different name from those issuers, and one of the best Landesbanks,” said the lead syndicate official. “But it is difficult for German issuers to attract investors at current swap levels.

“It means that investors are looking more closely into the quality of specific issuers, so only higher quality German banks can get benchmarks done well at these levels.”

Syndicate officials at and away from the leads said the deal offered a new issue premium of around 7bp, seeing BayernLB July 2022s at minus 16bp-15bp, bid, and seven year paper from Deutsche Hyp, Berlin Hyp an MünchenerHyp all quoted between minus 15bp and minus 13bp. They also noted that the deal had been priced in line with the last seven year Pfandbrief, a Eu500m deal for WL Bank on 20 October.

SEB AG leads Commerzbank, NordLB and SEB launched the Eu250m sub-benchmark three year public sector Pfandbrief with initial price thoughts of the 8bp over mid-swaps area, then moved to guidance of 7bp plus/minus 1bp before setting the re-offer at 7bp. The deal was priced with a yield of 0.006%.

A syndicate official at one of the leads said the deal had to be priced at 7bp to avoid printing it with a negative yield, with many accounts therefore limiting their orders at 7bp.

“Pricing a benchmark with a negative yield is something that others may test in the coming weeks or months, but this shows it is still a high hurdle,” he said.

The size of the final order book was not disclosed, but the lead syndicate official said the deal was “well-oversubscribed”.