Berlin Hyp sold a second, Eu500m long six year green Pfandbrief today (Wednesday), taking Eu870m of orders including strong demand from specialist green investors, and pricing the deal at the year’s joint-tightest spread. Finland’s Hypo is meanwhile preparing a Eu250m deal.

After announcing a mandate for a Eu500m October 2023 issue yesterday (Tuesday), leads Commerzbank, Crédit Agricole, JP Morgan, LBBW and UniCredit launched the deal this morning with guidance of the mid-swaps minus 12bp area. The spread was later fixed at minus 14bp on the back of Eu900m of orders. The final book stood at Eu870m, including Eu95m of joint lead manager interest.

“Overall, it’s a very fine trade,” said a syndicate banker at one of the leads. “The green aspect clearly helped here, with a really good amount of specialist green investors in the book, alongside a strong domestic bid and strong interest from the Benelux.”

“Although it was quiet in the covered bond market, it was a busy day overall, and it was nice to get a strong print for a very good issuer that is very committed to the green initiative, especially at a very tight level.”

The new issue is the joint-tightest benchmark covered bond this year, alongside a Eu500m seven year Pfandbrief for WL Bank that was priced at minus 14bp on 22 February

Berlin Hyp’s deal was deemed to have offered a new issue premium of around 1bp, with Berlin Hyp’s green debut, a May 2022 issue, seen at around minus 15bp, mid, pre-announcement, and the issuer’s 2023-2025 Pfandbriefe trading at around minus 16bp-15bp.

“For a German Pfandbrief this price is maybe not surprising, but you have to consider that the market now feels different from the market we all enjoyed weeks ago,” said a syndicate banker away from the leads. “To get such a level in less certain conditions is a good job, and they were probably supported in that by the dedicated green demand.”

Bankers concluded that there is still no discernible pricing differential between Berlin Hyp’s green Pfandbriefe and its traditional Pfandbriefe. They noted that in the senior unsecured market, green bonds were in some cases trading 2bp-5bp inside conventional comparables.

It has been suggested that green issuance could eventually benefit from a pricing advantage versus standard issuance, once the spread compression effect of the ECB’s covered bond purchases is lessened.

“I think for covered bonds this is something that will come with time,” said a syndicate banker. “The green covered bond market is still a young market, and all spreads are at the mercy of the ECB.”

Berlin Hyp sold the inaugural benchmark green covered bond in April 2015, a Eu500m seven year. Since then there has been no other benchmark covered bond issuance backed by green loans, although other issuers have sold socially-orientated covered bonds or use-of-proceeds products aimed at funding green and other sustainable initiatives.

The Mortgage Society of Finland (Suomen Hypoteekkiyhdistys, or Hypo) announced this morning that it has mandated BNP Paribas and Swedbank to arrange a European roadshow ahead of a potential Eu250m seven year covered bond. The roadshow will commence on Monday and conclude on Friday of next week (16 June), visiting the Benelux, Germany, Stockholm, Oslo and Helsinki.

The deal will be Hypo’s second public covered bond, following a debut Eu250m five year issue in May 2016. The Finnish issuer tapped this deal by Eu50m in September and has since carried out one private placement, in December.