Deutsche sold a Eu500m 10 year Pfandbrief today (Wednesday) that surpassed expectations and was seen as weathering headlines regarding the German bank, while DKD sold a first benchmark in over a year, as the primary market got off to a busy start of the month after a more modest May.

Four euro benchmark covered bonds were launched today, with Italy’s Banca Popolare di Milano and Norway’s SR-Boligkredit (see separate articles) also in the market, and bankers said each deal had gone well with market conditions conducive and demand strong.

Syndicate officials said investor appetite was particular high after only Eu5.25bn of euro benchmark supply in May – the quietest month in the market so far this year and the first in which euro benchmark redemptions surpassed supply.

They added that issuers were also keen to get deals done sooner rather than later because of a number of events which may restrict issuance later this month, including economic data points, a UK referendum on EU membership on 23 June, and a Spanish election on 26 June.

“It’s a good mix of issuers with a variety of spreads on offer today, and they have all gone respectably to very well,” said a syndicate official.

After announcing a mandate for a euro benchmark public sector Pfandbrief on Monday, Dexia Kommunalbank Deutschland (DKD) leads BayernLB, Commerzbank, Crédit Agricole, DZ and UniCredit launched the Eu500m no-grow September 2021 issue with guidance of the 7bp over mid-swaps area this morning. The spread was then fixed at 6bp on the back of books in excess of Eu650m, with the book closing at 11:15 CET.

DKD’s public sector Pfandbrief were on 4 May assigned a AA- rating by Scope, which is two notches higher than the programme’s only other rating, A from Standard & Poor’s, which was downgraded from A+ in May 2015. The new issue is DKD’s first benchmark Pfandbrief since the downgrade, with its last having been a Eu500m March 2022 issue sold in February 2015.

Syndicate officials away from the new issue’s leads said that the new double-A rating did not affect demand for the deal, however.

“The books are still relatively modest, accounting for the likely ECB participation,” said one. “Maybe if they’d taking Eu2bn of orders or something like that, but it doesn’t seem to have changed much.”

Having announced a mandate for a Eu500m no-grow 10 year mortgage Pfandbrief yesterday (Tuesday), Deutsche Bank leads Deutsche, DZ, HSBC, Raiffeisen Bank International and SEB launched the deal this morning with guidance of the 3bp over mid-swaps area, before revising guidance to the 1bp area on the back of books over Eu1bn. The spread was then fixed at minus 1bp on the back of Eu1.4bn of orders, with the book closing at 10:45 CET.

“It is, to be honest, a fantastic result,” said a syndicate official at one of the leads. “We were not expecting such a strong order book, and to move the spread by 4bp is a very good outcome.”

Deutsche Bank has suffered a variety of negative headlines this year in combination with a poor performance in the equity and credit markets, although has recovered from its lows.

“I thought the headlines would have had more of an impact, but I was proved wrong,” said the lead syndicate official. “I think people did not think so much about the credit and looked at this as a scarce, top quality cover pool.”

Bankers said the new issue offered at most 1bp of premium versus Deutsche’s secondary curve, seeing the German bank’s June 2022s at minus 6bp, mid, and March 2024s at minus 3bp.

However, a syndicate officials away from the lead said the new issue offered a slightly larger pick-up versus recent 10 year Pfandbrief supply, seeing 2026s from Münchener Hypothekenbank and Deutsche Hypothekenbank at around 8bp, mid.

“Generally these sort of stories doesn’t have any impact on Pfandbrief, but it looks like they paid up slightly versus other issuers, and that is probably because of those headlines,” he said.

The lead syndicate official noted that Deutsche has a benchmark Pfandbrief that will redeem on Thursday of next week (9 June), and said the new issue was launched in part to refinance the maturing issue.

Syndicate officials said that at least one more German issuer is monitoring the market and considering launching a benchmark Pfandbrief in the coming days.