MünchenerHyp launched its first benchmark of 2016 yesterday (Monday), a Eu500m 10 year Pfandbrief, and an official at the German lender said that a yield level of 0.5% was key for investors while the re-offer spread put the issuer almost flat to a recent German SSA.

Münchener Hypothekenbank’s new issue came after successful 10 and 15 year euro benchmarks for Caffil and ABN Amro, respectively, last week as the market gradually reopened after the Easter holidays.

“We felt it was the right market timing because there was less supply last week,” said Martin Schmid, who handled the transaction at MünchenerHyp. “There is also the question of if we need the liquidity, and from that perspective there was a perfect match between the liquidity side and the market conditions.”

Leads DZ, HSBC, LBBW and UniCredit yesterday morning went out with guidance of the mid-swaps flat area for MünchenerHyp’s 10 year mortgage Pfandbrief, before re-offering the deal at minus 1bp, with a yield of 0.508% and a coupon of 0.5%.

“We wanted to achieve a particular yield, namely 0.5%, for investors,” said Schmid. “We believe that the 10 year bracket is the sweet spot for issuing a covered bond because of the shape of the yield curve.”

Swap rates backed up after yesterday’s open, ensuring the yield level was reached.

“When we launched the issue at around 9 o’clock, the swap rate was below 0.5%,” said Schmid. “Shortly before pricing yields rose, so it was great for investors to have the 0.5% yield, but for the book it was a bit late.”

He noted that a Eu1.5bn 10 year issue for L-Bank was priced at mid-swaps minus 2bp on Wednesday.

“Last week L-Bank, which is a really strong credit, came at roughly the same level for a 10 year bond,” said Schmid, “and we are really satisfied to have come to the market on a par with a German SSA.”

MünchenerHyp’s book totalled Eu730m, with 44 investors participating.

“We had many accounts involved,” said Schmid, “with a lot of real money investors that we like to have in the book alongside central banks.”

Banks were allocated 44.3%, funds and insurance companies 17.7%, and central banks and supranationals 38%. Germany took 78.6%, Switzerland 2.3%, the Nordics 6.2%, France and the Benelux 3.7%, Asia 9%, and the UK 1.2%.

MünchenerHyp’s last benchmark was a Eu500m long six year Pfandbrief in October.

“We do not have as many maturities this year as last year, so we are a bit limited in our issuing volumes,” said Schmid. “But we will watch the market keenly, and as soon as market conditions and investor interest are in line with our expectations, we are prepared to take advantage of that.

“By the way, we are also interested in issuing covered bonds in foreign currencies this year.”