HSH Nordbank is set to issue a Eu500m no-grow three year public sector Pfandbrief tomorrow (Tuesday), having announced a mandate this afternoon. The deal will be the shortest dated benchmark German Pfandbrief in over a year, but is expected to price with a positive yield.

Commerzbank, HSH Nordbank, Natixis, NatWest Markets and UniCredit have the mandate. A syndicate banker at one of the leads said the deal will be launched tomorrow, subject to market conditions.

The new issue will be the first benchmark three year covered bond out of Germany since March 2016, when Berlin Hyp sold a Eu500m three year that was the first euro benchmark to be priced with a negative yield.

Bankers questioned whether such a short-dated deal would have been possible for HSH before a rise in yields that began last week, suggesting that a three year German Pfandbriefe would have been priced with a negative yield. The new issue is expected to be priced with a positive yield, however.

“I’m not sure how much demand we would have found in this pre-summer market for an Aa2 rated negative yielding Pfandbriefe,” said one. “But the curve suggests this deal will be in positive territory.”

HSH Nordbank’s last new benchmark Pfandbrief was a Eu500m mortgage-backed seven year in April 2016.