Commerzbank benefited from the Trump-inspired back-up in yields to launch the shortest-dated German benchmark since the summer today (Wednesday), a Eu500m long six year whose outcome was deemed as strong as was realistically achievable for a Pfandbrief, with the books comfortably subscribed.

The German bank’s new issue comes as a rise in yields has put intermediate maturities back on the menu, and is the shortest dated new euro benchmark German Pfandbrief since 1 July, when DKD sold a Eu500m September 2021 issue, and the shortest triple-A rated German benchmark since 3 June, when LBBW sold a Eu750m November 2021 issue.

Leads Commerzbank, Danske, Deutsche, ING and Natixis launched the new Eu500m no-grow February 2023 mortgage Pfandbrief this morning with guidance of the mid-swaps minus 10bp area, before guidance was revised to minus 12bp-11bp, will price within range, with books in excess of Eu500m. The deal was then re-offered at minus 12bp and at a yield of 0.18%, on the back of books “well in excess” of Eu600m comprising 30 investors.

“It looks like a decent outcome in that they were able to bring the spread down while also getting a comfortable level of oversubscription,” said a banker away from the leads. “Even after this back-up in yields, I think recent trades have shown us that’s the most you can hope for with a German Pfandbrief at such levels.”

The last two benchmark German Pfandbriefe attracted marginally more demand in more stable market conditions, with Eu500m issues from DG Hypothekenbank and ING-DiBa both bringing in books of over Eu750m, on 25 October and 9 November, respectively.

Intermediate maturities have become a viable option for many issuers for the first time in months amid a wider market realignment after Donald Trump’s surprise victory last week. Although some benchmarks have been successfully priced with negative yields this year, most issuers have preferred to move along the curve to offer investors positive, if still slim, returns.

None of the covered bonds in the Markit iBoxx indices with a maturity of six years or longer are currently quoted at a negative yield, noted Maureen Schuller, head of financials research at ING, whereas some 34% of covered bonds in the six and seven year maturity bucket were quoted at negative yields the day before the US election.

“We expect this stronger issuance focus away from the 10 year area to persist,” she added. “Judging by the smaller percentage of bonds currently quoted at a negative yield in the two to five year segment, we may even see issuance return in this area before the end of the year, which would be the first time since June.”

Investors will also be favouring shorter dated paper while yields remain volatile, bankers added.

“In this more risk averse scenario – which will be amplified as we’re getting into the year-end and therefore asset managers will want to keep more of an eye on performance – shorter dated bonds will be higher on the agenda,” said a syndicate banker, “especially now they actually offer some form of compensation in terms of a positive yield.”

Bankers said Commerzbank’s deal offered a new issue premium of 2bp-3bp, citing the issuer’s July 2024s at minus 14bp, bid, and other triple-A 2023-2024 paper at this level.