DG Hyp attracted over Eu1.25bn of demand for a “smooth” Eu500m long six year Pfandbrief today (Thursday), following a similar strategy to a recent wave of its peers to close books swiftly and take German supply in the past five business days to Eu3.25bn. Other issuers are said to be eyeing the market.

Last Friday LBBW reopened the covered bond market after a volatile week without benchmark supply and among other issuers to tap the market in a window of relative stability since then have been a further four Germans: Berlin Hyp and Deutsche Hypo on Monday, with Helaba and HSH Nordbank following.

Deutsche Genossenschafts-Hypothekenbank (DG Hyp) leads DZ, HSBC, LBBW, UniCredit and WGZ launched the Eu500m no-grow September 2022 mortgage Pfandbrief with guidance of the 1bp over mid-swaps area, before moving to guidance of the minus 1bp area, plus or minus 1bp, will price within range. The spread was then set at minus 2bp, with the book closing at over Eu1.25bn and more than 50 accounts.

“This was a smooth trade that looked fairly straightforward, following a similar approach to the wave of successful Pfandbriefe that have led the market reopening in the last week, and it’s encouraging to see these deals continue to do well,” said a syndicate official away from the leads.

Bankers highlighted the speed of the bookbuilding process, which began at 9.00 CET and ended at 10.30.

“It was a good, fast, quality intra-day execution – the kind of execution you can do with this type of trade when you need a cautious approach and when you must still expect sudden volatility,” said a syndicate official at one of the leads.

He said DG Hyp and its leads had adopted a slightly different strategy to those taken by the recent German issues, noting that the new issue’s 6.5 year maturity was in the middle of the recent Eu500m Pfandbriefe from LBBW, which priced a six year issue at minus 3bp down from guidance of flat, and Berlin Hyp, which priced a seven year at minus 1bp, down from guidance of 2bp.

“So we decided to aim down the middle and start at 1bp,” he said, “and in the end we were able to tighten the spread by 3bp, in line with LBBW and Berlin Hyp, and print with a premium of 3bp, also in line with LBBW and Berlin Hyp.”

Syndicate officials said fair value for the deal was around minus 5bp. They said the recent Pfandbriefe are the most appropriate comparables for the new issue, seeing LBBW’s February 2022s at 4bp through, mid, and the Berlin Hyp February 2023s at 2bp through.

The lead syndicate official added that the development of the order book was not disclosed during the pricing process in order to avoid inflated orders.

Syndicate officials said a number of issuers are monitoring the market, and said some could press ahead with deals tomorrow.

“If the screens stay green, I think we could see more supply on Friday,” said one. “We’ve benefitted from five constructive days, but you don’t know how long it’ll last, so if you can go, you go.”