DG Hypothekenbank attracted over Eu750m of orders to a Eu500m long eight year Pfandbrief yesterday (Tuesday), and the issuer’s head of treasury highlighted the deal’s strong momentum and quick execution, adding that it is now unlikely to return with another new benchmark this year.

“We are very pleased with the transaction,” Patrick Ernst, head of asset-liability and head of treasury at DG Hyp, told The CBR. “The order books were opened at 9:00am CET and the trade had an excellent start.”

Leads ABN Amro, Deutsche, DZ Bank, Helaba and Natixis launched the Eu500m no-grow December 2024 mortgage Pfandbrief with guidance of the mid-swaps minus 12bp area. After 75 minutes guidance was 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 ultimately priced at minus 14bp.

“Due to the strong momentum,” added Ernst, “books were closed at 11:00am with total orders at Eu850m – Eu750m allocatable – with a final re-offer spread of minus 14bp.”

Bankers at the leads acknowledged that there had been some price sensitivity in the book, with some orders dropping out when the price was fixed, but said most investors had accepted the final spread.

They also said the deal offered little to no new issue premium, seeing DG Hyp June 2024s at minus 15bp, bid, and MünchenerHyp June 2024s and Commerzbank July 2024s both at minus 14bp. A syndicate banker at one of the leads said this was in line with most recent German deals – except for a Eu750m 10 year for NordLB on Monday that was deemed to have paid up slightly due to name-specific headwinds.

“The initial guidance already did not offer much in the way of a premium, so I think it was transparent from the start that this would be priced at the tighter end,” he said.

Ernst said the spread was not DG Hyp’s exclusive focus, and that the price was determined by the momentum behind the deal and the quality of the order book.

Over 40 accounts were in the final book, with banks allocated 48.11%, central banks 31.02%, asset managers 12.53%, retail investors 6.34%, and insurance companies 2%. Accounts in Germany took 81.42%, the Nordics 6%, Luxembourg 3.6%, Switzerland 3%, the Netherlands 2.8%, France 1.71%, Italy 1%, the UK 0.45%, and the UAE 0.02%.

Ernst added that the long eight year maturity and the timing of the trade had been chosen to fit with the development of DG Hyp’s cover pool.

“Furthermore we have a focus on favourable market conditions which occurred this week and encouraged us to proceed with the deal,” he said.

The new issue is DG Hyp’s third benchmark Pfandbrief of 2016, following a Eu500m September 2022 issue in February and a Eu500m April 2026 issue in May, and Ernst said the issuer will probably not return to the market in benchmark format this year.

“For refinancing our commercial real estate business we have been planning to issue between Eu1.5bn to Eu2bn of covered bonds per year,” he said. “From this perspective, a further benchmark in 2016 is rather unlikely.”