DG Hypothekenbank issued a Eu500m long nine year Pfandbrief today (Wednesday) that was twice-subscribed while offering only a 2bp new issue premium and landing at the tightest spread of any benchmark in the 10 year part of the curve this year.

In pushing out towards the long end, DG Hyp broke from a recent trend of German issuers focussing their Pfandbrief issuance in intermediate maturities, with the last German benchmark in the 10 year part of the curve having come in early January.

After announcing a mandate for a Eu500m no-grow long nine year mortgage Pfandbrief yesterday (Tuesday), DG Hypothekenbank leads BayernLB, Commerzbank, Crédit Agricole, DZ Bank and UBS launched the September 2026 issue this morning with guidance of the mid-swaps minus 7bp area.

Guidance was revised to the minus 9bp area on the back of over Eu1bn of orders before the spread was set at minus 11bp, with books at Eu1.2bn. It was later priced with a coupon of 0.5%. The final book stood at over Eu1bn.

“It’s a nice trade, and it looks like they tapped into some good demand for longer dated German paper,” said a banker away from the deal. “Minus 11bp is a very good spread to get at the long end.”

The deal is the tightest euro benchmark covered bond in the 10 year part of the curve since 8 November, when ING-DiBa priced a Eu500m straight 10 year Pfandbrief at 15bp through mid-swaps, and the third tightest deal in any maturity this year.

The deal was seen as offering a new issue premium of around 2bp, with bankers citing DG Hyp’s March 2026s at minus 13bp, mid, as well as WL Bank February and August 2026s and MünchenerHyp April 2026s, all quoted at minus 14bp. ING-DiBa’s November 2026s were seen at minus 15bp.

Bankers noted that this was more premium than has been offered by recent German benchmarks, many of which have been priced flat to or even through fair value, but said this was appropriate given the longer maturity of DG Hyp’s deal.

Prior to today’s new issue, there have been only two new German benchmarks in the 10 year part of the curve this year, a Eu750m 10 year for Helaba on 5 January and a Eu500m 10 year for NordLB on 9 January, which has since by tapped by Eu300m.

DG Hyp’s deal was the first benchmark covered bond issuance since last Wednesday, as the market had been muted in the interim by German holidays. Bankers noted that the senior unsecured market has been more active – with RBS and Commerzbank among issuers tapping the senior market today and ING having this afternoon mandated a HoldCo transaction – and said some issuers may focus on such issuance after spreads in the senior market have tightened to covered bonds.

“But there’s still opportunities in covereds and there are issuers that are looking,” said a syndicate banker. “It certainly won’t be another week until the next deal comes out.”