Deutsche Apotheker- und Ärtztebank sold the tightest 10 year benchmark covered bond of the year today (Wednesday), a Eu500m no-grow Pfandbrief priced at 13bp through mid-swaps on the back of a domestic-driven bid. NordLB and OCBC are expected tomorrow in seven and five years, respectively.

The 10 year for Deutsche Apotheker- und Ärtztebank (Dapo or apoBank) is just the latest in a series of benchmarks in the maturity since the end of the summer break, but took pricing to a new tight. The pricing was flat to where Commerzbank on Friday priced a Eu250m tap of a Eu750m 10 year launched at 11bp through on 17 August, a day after MünchenerHyp had priced a Eu750m nine year at minus 13bp. Dapo’s new issue is the tightest 10 year benchmark since ING-DiBa sold a Eu500m 10 year at 15bp through in November 2026.

The level was achieved in spite of Dapo typically trading wide of its larger peers. The 13bp through was deemed inside fair value, with its February 2021s at 13.5bp through, mid, and its March 2023s at 14bp through. Initial guidance had been the 10bp through mid-swaps are, followed by revised guidance of 12bp through, plus or minus 1bp.

“It was a tremendous trade,” said a banker at one of the leads, “at least in terms of the final spread. Minus 13bp for 10 years speaks for itself.

“Clearly they are getting closer to their cooperative peers – MünchenerHyp, WL Bank and DG Hyp – which is really good news for them.”

A syndicate banker at another of Dapo’s leads said the result should not have been such a surprise. Ahead of execution he had predicted that the deal would price more in line with tighter trading Pfandbriefe than Dapo’s curve, comparing the deal to a Hamburger Sparkasse Eu500m seven year issue in May that, also from another smaller and rarer name, was priced inside the issuer’s curve and nearer more established, tighter names – although Haspa still offered a bigger pick-up.

The first lead banker said that the book of just over Eu700m good at re-offer, including joint lead manager interest, was solid, if unspectacular, and very domestic-driven.

“For sure, at this level, it’s a pretty domestic asset class,” he said, suggesting international accounts might, for example, look in the SSA sector at Finnish Municipality Finance’s Eu500m 10 year priced at 7bp though mid-swaps yesterday.

“But there’s good domestic demand for this,” he added. “The Pfandbrief is still having a very solid investor base.”

Germany was allocated 92% of the issue, southern Europe 4%, Switzerland and Austria 3%, and the UK 1%. Banks took 42%, central banks 36%, funds 18%, insurance companies 3%, and corporates 1%.

Commerzbank, DekaBank, DZ and LBBW were bookrunners.

NordLB is expected to tomorrow issue the first seven year Pfandbrief benchmark since Haspa’s deal in May, having mandated ABN Amro, BayernLB, BNP Paribas, Crédit Agricole and NordLB for a Eu500m no-grow public sector Pfandbrief.

A syndicate banker at one of the leads noted that NordLB has already issued a 10 year benchmark this year, a Eu500m issue in January that it tapped for Eu300m later that month, and also has a gap in a curve that has 2021, 2026 and 2027 points on it. He added that the seven year maturity should also differentiate its deal from the recent 10 year supply, but said it was not necessarily comparable to a CBPP3-ineligible Eu500m seven year for SR-Boligkreditt yesterday that attracted over Eu1.75bn of demand.

Oversea Chinese Banking Corporation is expected with only its second covered bond, following a Eu500m five year debut in March. Barclays, BNP Paribas, Crédit Agricole, DZ, JP Morgan and OCBC have been mandated for a euro benchmark five year Reg S transaction.

Singapore banks’ euro benchmarks have thus far been in the Eu500m-Eu750m size range. A syndicate banker at one of OCBC’s leads said that its March 2022s are quoted at flat to mid-swaps, mid.

A banker away from the leads said that, for those accounts that have lines for the credit, the deal should prove interesting for offering a pick-up versus “super-tight” five year paper not only from the Eurozone but also the Nordics and the UK.

Photo: apoBank/Xing