A Eu500m 10 year Pfandbrief for WL Bank today (Tuesday) was deemed less “exuberant” than preceding German supply after it attracted less demand and was priced in the middle of revised guidance, with an aggressive start blamed. The final premium of at most 1bp nevertheless impressed.

The new issue for Westfälische Landschaft Bodenkreditbank (WL Bank) is the third long-dated benchmark German Pfandbrief since Wednesday, when MünchenerHyp issued a Eu750m long October 2026 Pfandbrief that was the first euro benchmark in over a month. Commerzbank followed the next day with a Eu750m 10 year.

After a mandate announcement for the Eu500m no-grow mortgage Pfandbrief yesterday (Monday) afternoon, WL Bank leads DZ Bank, Erste, Helaba, Natixis and NordLB launched the deal this morning with guidance of the mid-swaps minus 11bp area.

After almost two hours, guidance was revised to the minus 12bp area plus or minus 1bp will price within range, on the back of over Eu575m of orders, including Eu50m of joint lead manager interest. The spread was later set at minus 12bp with books approaching Eu600m, including Eu60m JLM interest.

“It got off to a pretty slow start compared to last week’s deals, which were comfortably subscribed after just one hour and went on to get even more demand and price 3bp inside guidance,” said a syndicate banker away from the leads.

MünchenerHyp’s long nine year issue was launched with guidance of the mid-swaps minus 10bp area and ultimately priced at minus 13bp on the back of over Eu1bn of orders, whereas Commerzbank’s 10 year was launched with guidance of minus 8bp and priced at minus 11bp with a book of around Eu1bn.

A syndicate banker at one of WL Bank’s leads said that the issuer had nevertheless secured an impressive spread.

“It is not exactly exuberant compared to what came before, but it is steady,” he said. “Yes, the books look a little less exciting than for the other two transactions, but I wouldn’t be too concerned about that.

“They achieved a very solid less 12bp, with a very slim NIP for a new 10 year.”

WL Bank’s deal was deemed to have offered a new issue premium of at most 1bp, with bankers citing WL Bank April 2027s at minus 13bp, mid, and Commerzbank’s new August 2027s at minus 12bp. Bankers noted that WL Bank trades slightly tighter than Commerzbank across the curve, and slightly wider than MünchenerHyp.

A syndicate banker away from the leads attributed the deal’s more modest reception to its more aggressive starting point.

“I would have advised them to start at the same point as MüHyp, i.e. minus 10bp,” he said. “At minus 11bp, even if you add the no-grow condition, I think many investors would have a natural reflex, recalling that recent Pfandbriefe moved 3bp to landing, which would have put WL Bank tighter than MüHyp and the comps.

“The final spread being stuck at minus 12bp, tells you that there must have been some price sensitivity in the book.”

A syndicate banker at one of the leads agreed that the relatively tight starting level limited demand for the deal.

“A minus 10bp start would probably have allowed for more dynamics, but it was the issuer’s wish to start a little tighter, in order to give investors a clear idea of how the deal would be priced,” he said.

Bankers added that investor fatigue was unlikely to have been a factor, despite the deal being the third long-dated benchmark Pfandbriefe in less than a week.

“We have only seen Eu2bn so far, which is very small after weeks of no benchmark supply,” said one.

The new issue is WL Bank’s second benchmark Pfandbrief this year, following a Eu500m seven year issue in February. It also tapped a Eu500m April 2027 Pfandbrief by Eu250m in April.

It is the bank’s first deal since it was announced in June that a memorandum of understanding had been signed by WL Bank and fellow cooperative real estate bank DG Hypothekenbank regarding a planned merger, after key details had been agreed. The two Pfandbrief issuers are both members of the DZ Bank Group, following a merger last year of their parents, DZ Bank and WGZ Bank.

The new entity, to be called DZ Hyp, will be Germany’s largest Pfandbrief issuer by volume. The move is expected to have only a limited impact on the credit quality and spreads of the issuers’ Pfandbriefe, and bankers said the merger is unlikely to have had any impact on demand for today’s new issue.