MünchenerHyp was upfront about its ambitions when issuing a Eu500m 10 year Pfandbrief on Tuesday that was its first euro benchmark in over a year, according to deputy head of funding Claudia Bärdges-Koch, eschewing “eye-catching” guidance to avoid any over-tightening.

The new issue was MünchenerHyp’s first new euro benchmark covered bond since April 2016, when it sold a Eu500m 10 year Pfandbrief.

Claudia Bärdges-Koch, deputy head of treasury at MünchenerHyp, said the issuer had been flexible regarding the timing of its return to the euro market, ultimately deciding to issue ahead of its blackout period, with a recent lack of supply and high liquidity in the market an important factor in its decision.

Leads Commerzbank, DZ Bank, Goldman Sachs and HSBC launched the mortgage Pfandbrief with guidance of the mid-swaps minus 10bp area on Tuesday morning. Guidance was later revised to the minus 11bp area on the back of around Eu600m of orders, before the spread was set at minus 12bp and the size at Eu500m, with the book at around Eu650m.

The deal was the tightest new benchmark covered bond with a maturity of 10 years or longer since November, when fellow German ING-DiBa priced a Eu500m 10 year at minus 15bp, and Bärdges-Koch noted that the spread compared favourably to a Eu1bn 10 year issue for peer LBBW in January, which was priced at minus 7bp.

“Given the fact that a 10 year benchmark was priced at mid-swaps minus 7bp in January, the outcome at minus 12bp on Tuesday leaves no question regarding satisfaction with the deal,” she said. “The focus was always on price and never on size.”

She added that, having carried out intensive investor relations work, MünchenerHyp chose not to start the deal with an “eye-catching” single digit spread as initial guidance.

“Investors told us that they do not like tightening of 4bp or more within the bookbuilding process,” she said. “Therefore we already started with a tight spread and were in a position to reach our target at minus 12bp.”

The deal was ultimately priced with a coupon of 0.625%.

“Unfortunately the yield curve was neither valid for a 0.5% coupon in the seven year nor a 0.75% coupon in the 10 year maturity,” added Bärdges-Koch. “Having our benchmark curve in mind, the 10 year maturity was a perfect fit.”

The final book stood at over Eu650m, including joint lead manager interest, with over 30 accounts participating. Central banks were allocated 44% of the deal, banks 36%, fund managers 15%, and SSAs 5%. Accounts in Germany took 83%, Asia 8%, the Middle East 5%, France and the Benelux 2%, and others 2%.

“It was not a huge book, but the deal has continued to perform well on secondary,” said a syndicate banker at one of MünchenerHyp’s leads. “It shows that demand for a 10 year expensive German Pfandbrief is limited, but if you limit the deal size and are clear with your targets there is still a very solid trade you can do.

“That is a message for any other German issuer out there that wants to do something at the long end.”

During MünchenerHyp’s absence from the euro benchmark market, it sold one US dollar benchmark, a $600m three year in July 2016, and Bärdges-Koch added that it has since the start of 2016 placed four Swiss franc private placements of Sfr100m or more.