Hamburger Sparkasse attracted over Eu850m of orders to a rare Eu500m seven year Pfandbrief today (Tuesday), and its spread was deemed attractive versus recent deals from more established issuers, while being inside its curve. Austria’s Hypo Tirol issued a Eu250m seven year Pfandbrief.

Hamburger Sparkasse (Haspa) returned to the covered bond market in February 2016 with its first benchmark in 10 years, a Eu500m six year that is its only other benchmark outstanding alongside today’s new issue.

After announcing a mandate yesterday (Monday) afternoon, Haspa leads Commerzbank, DekaBank, DZ Bank, Erste and LBBW launched the Eu500m no-grow five year mortgage Pfandbrief with guidance of the mid-swaps minus 7bp area this morning.

Guidance was later revised to the minus 9bp area plus or minus 1bp, will price within range, on the back of books above Eu750m, before the spread was fixed at minus 10bp, with books above Eu850m.

The deal was priced with a coupon of 0.375% to yield 0.386%.

“We’ve seen in some of the last German trades that appetite for Pfandbriefe is relatively modest compared to other markets,” said a syndicate banker at one of the leads. “With that in mind, this is a strong result for Haspa.

“It helped that this deal came in a part of the curve where we have had hardly any Pfandbrief, and that compared to other German seven years, this even looks cheap at minus 10bp. As part of the savings bank sector, they also enjoyed good support from the other Sparkassen.”

The new issue is the first benchmark German Pfandbrief to have a maturity of seven years or shorter since 22 February, when WL Bank sold a Eu500m seven year, with most German supply this year having come in the eight to 10 year part of the curve.

The new issue was deemed to have been priced through fair value based on the secondary spread of Haspa’s one outstanding, with bankers seeing the March 2022s at around minus 8bp. bid.

“I think you have to try to detach yourself as much as possible from this one outstanding, explaining its rather wide level by saying that it is illiquid,” said a banker at one of the leads. “People apparently were not bothered by the fact there is this dot on the curve, and I think the reason for this is that they were looking instead at the curves of other issuers.”

Bankers away from the leads agreed that the spread looked more attractive when compared with those of seven year Pfandbriefe from more established names, with WL Bank March 2024s, which were priced at minus 14bp in February, seen at around minus 16bp, bid.

Bankers noted that Haspa’s new issue had also been priced at the same spread as or slightly wider than more recent longer and larger Pfandbrief, with a Eu750m nine year for UniCredit having been priced at minus 10bp on 25 April and a Eu500m 10 year for MünchenerHyp at minus 12bp on 2 May, for example.

Some suggested that the issuer could therefore have been more aggressive with its pricing.

“Looking just at where recent trades have come, for me Haspa were a bit defensive at the start and could probably have priced a little tighter,” said a syndicate banker away from the leads. “They are a very strong German savings bank and I think they could fairly come flat to names like UniCredit.”

Haspa’s Eu500m six year issue last year was priced flat to mid-swaps, which was 1bp inside a Eu1bn six year issue for UniCredit the previous day.

However, others said the pick-up offered by today’s new issue was appropriate.

“For an issuer that was out of the market for so long, it makes sense to stay a bit back of the bigger names,” said one.

Hypo Tirol launched its new issue today after completing a series of investor meetings yesterday, having flagged its intention to print a Eu250m no-grow Austrian Pfandbrief with an intermediate maturity.

Leads Erste, LBBW and UniCredit launched the seven year mortgage-backed issue with guidance of the 12bp over mid-swaps area this morning. Guidance was then revised to the 10bp area on the back of books above Eu400m, including Eu50m joint lead manager interest, before the spread was fixed at 8bp, with books above Eu470m, including Eu50m JLM interest.

“It looks to have worked convincingly,” said a syndicate banker away from the leads. “From time to time these Eu250m trades do have issues in finding buyers, but at the moment we are in a market where you can pretty much sell anything, so if this deal did not work today then it would never work.”

Bankers away from the deal said it offered a “modest” new issue premium versus recent Austrian paper.

Hypo Tirol sold its first and only benchmark covered bond in February 2016, a Eu500m five year, having previously issued sub-benchmarks.