A Eu500m long eight year Pfandbrief for DG Hyp impressed today (Tuesday) at a “punchy” price, with bankers comparing it favourably to a level achieved by NordLB yesterday, although the new issue’s similarly modest book was interpreted as a reflection of limited excitement for German paper.

After announcing a mandate yesterday (Monday) afternoon, DG Hypothekenbank leads ABN Amro, Deutsche, DZ Bank, Helaba and Natixis opened books for the Eu500m no-grow December 2024 mortgage Pfandbrief with guidance of the mid-swaps minus 12bp area this morning.

The spread was then revised to the minus 13bp area, plus or minus 1bp, will price within range, on the back of books “well above” Eu750m, including Eu40m joint lead manager interest. The deal was then re-offered at minus 14bp, with the final allocatable book in excess of Eu750m with over 40 orders.

Bankers said the result compared favourably with a Eu750m 10 year public sector Pfandbrief from NordLB that was priced at minus 11bp yesterday, whose book was last reported at over Eu750m including Eu55m of joint lead manager interest. NordLB’s deal was deemed to have received modest response because of negative headlines specific to the name.

“It looks like quite a punchy price, especially compared to NordLB,” said a syndicate banker away from the deal. “I would have expected them to have ended up at minus 13bp-12bp, so I am presently surprised by how this has gone.

“Judging by the spread, it looks like the book is slightly stronger than that of NordLB.”

Bankers also attributed the tighter spread of DG Hyp’s Eu500m issue to its smaller size, which was limited from the start.

Syndicate bankers at and away from the leads said the deal offered almost no new issue premium, seeing DG Hyp June 2024s at minus 15bp, bid. They also cited MünchenerHyp June 2024s and Commerzbank July 2024s, both at minus 14bp. NordLB’s deal was seen as offering a new issue premium of around 3bp.

The deal is the tightest benchmark covered bond since 23 August, when Commerzbank priced a Eu750m December 2026 issue at minus 16bp.

However, bankers also noted that the demand for both German deals fell short of the levels of orders for recent benchmark supply from other jurisdictions.

“To me, it looks like both these German deals have succeeded in getting those accounts that are really interested in buying at these negative spreads and slim yields into the book,” said a banker away from the leads, “but not much more than that.”

The deal was priced with a coupon of 0.05% to yield 0.088%.

Maureen Schuller, head of financials research at ING, noted that a Eu2bn public sector DG Hyp Pfandbrief will mature next Monday.

“Subsequently, within the euro benchmark segment DG Hyp will only have mortgage covered bonds outstanding, all of a smaller Eu500m size,” she added.

The deal is DG Hyp’s third benchmark covered bond of the year, following a Eu500m September 2022 issue in February and a Eu500m April 2026 issue in May.