Hypo Oberösterreich could launch its first public covered bond as soon as tomorrow (Thursday), having today announced a Eu300m seven year issue. A Eu175m Berlin Hyp increase to a Eu325m May 2024 mortgage Pfandbrief this morning was meanwhile only just subscribed.

Berlin Hyp leads BayernLB, Commerzbank, Deka and DZ Bank reopened the May 2024 issue for a tap size of Eu175m with guidance of the mid-swaps minus 14bp area. The spread was then fixed at minus 14bp and the deal priced with a coupon of 102.75% to yield 0.009%.

The final order book passed the Eu175m threshold, excluding lead manager interest, although a syndicate banker at one of the leads acknowledged that the book had been slow to build.

“It took us quite some time to get those rather meagre Eu175m orders,” he said. “It is hard to say why, as the spread is of course not exciting, but it is in line with where you’d expect a German Hypothekenbank to trade in the long seven, short eight years, and yields were uninspiring on other recent trades, too.

“But in the end the deal is done and we were able to achieve subscribed books excluding lead manager interest.”

Syndicate bankers said the tap offered little to no new issue premium, citing benchmark issues including Berlin Hyp February 2023s at minus 17.5bp, mid, and April 2021s at minus 15bp. They also saw WL Bank 2024-2026 paper at minus 18bp-17.5bp, and MünchenerHyp 2025-2026 paper at minus 17.5bp-16.5bp.

Bankers at and away from the leads said that the outstanding benchmarks were more appropriate comparables than the original deal, because the sub-benchmark issue had been trading substantially wider due to its smaller size.

“This tap brings the deal benchmark size, which changes the picture in terms of spread,” said the lead syndicate banker. “Rather, we paid more attention to where it would trade as a benchmark.”

The deal is the first benchmark German supply since 24 August, when Deutsche sold a Eu500m 12 year issue.

Hypo Oberösterreich announced this morning that it will come to the market with a Eu300m seven year debut public covered bond potentially as soon as this week, after having completed a European roadshow yesterday (Tuesday).

A syndicate official at one of leads DZ, Erste, LBBW and RBI, said the Austrian deal could be launched tomorrow, despite an ECB meeting tomorrow afternoon.

“One could definitely do a deal tomorrow, as long as you are done by 14:00,” he added.

Syndicate bankers at the leads cited as comparables a variety of benchmarks from other Austrian issuers, including Raiffeisenlandesbank Niederösterreich-Wien April 2021s at minus 3bp, mid, September 2022s at minus 0.5bp, and March 2025s at 1bp and Raiffeisenlandesbank Oberösterreich September 2026s at 1bp. Austria October 2023s were seen at minus 35bp.

The issuer announced a mandate for its first public sub-benchmark covered bond on 7 October. The deal will be launched from a newly established covered bond programme, with Hypo Oberösterreich having previously issued privately placed covered bonds out of a different programme.