UniCredit paid a new issue premium of some 5bp on a Eu500m long six year Pfandbrief that attracted Eu650m of orders today (Tuesday), with its recent activity and the tight levels of Pfandbriefe cited as factors. The issuer is meanwhile working towards a US dollar Pfandbrief.

The new euro benchmark comes less than two months after UniCredit’s German arm last tapped the market, with a Eu750m nine year mortgage Pfandbrief on 25 April. That was priced at mid-swaps minus 10bp following guidance of minus 9bp on the back of Eu900m of demand.

Alexander Meyer, funding and flow management at UniCredit Bank AG (HVB), said that the issuer returned to the market as conditions appeared favourable and “with all the roadblocks out of the way”. He said that at the time of the nine year deal investor feedback had suggested that a shorter dated deal might work better, with investors anticipating rising yields and hence preferring shorter maturities.

Leads Crédit Agricole, Danske, Erste, Helaba and UniCredit this morning went out with a benchmark-sized October 2023 mortgage Pfandbrief and, as with the nine year, started with guidance of the minus 9bp area and finished with a re-offer spread of minus 10bp, having fixed the pricing once orders topped Eu500m after 90 minutes. The final order book reached over Eu650m, comprising 35 accounts.

Meyer said that the outcome was satisfactory, but that the result shows investors are clearly positioning for higher rates later in the year.

He put the new issue premium at around 5bp, citing July 2023 outstandings at minus 15bp.

“Obviously clients expect that kind of NIP or even higher because of the historically tight Pfandbrief levels,” said Meyer.

A syndicate banker away from the leads said that the deal had gone “OK, but no more”, and suggested that the underperformance of the recent nine year – which had widened 1bp since launch – had not helped.

UniCredit issued four euro benchmarks of Eu500m apiece in 2015 but only one in 2016, albeit for Eu1bn. The issuer has a target of Eu3bn for Pfandbrief issuance this year, according to Meyer, and could therefore issue two more euro benchmarks.

However, he noted that the issuer is preparing a public Pfandbrief in US dollar that could emerge by year-end.