A EUR500m long six year Pfandbrief for Aareal today (Tuesday) was deemed further evidence of a pushback against deeply negative spreads, the deal getting stuck at minus 14bp, while LF Hypotek fared better with a EUR500m seven year priced at minus 1bp.

Aareal announced a mandate yesterday (Monday) morning for the EUR500m no-grow mortgage Pfandbrief, via BayernLB, BNP Paribas, Commerzbank, DekaBank and UniCredit.

The July 2024 deal was launched this morning with guidance of the mid-swaps minus 14bp area. After around two hours and 20 minutes, the leads set the spread at minus 14bp with books above EUR400m, excluding joint lead manager interest. Books closed around 45 minutes later, and the final size of the order book was not disclosed.

“It looks like they will have some bonds left over,” said a syndicate banker away from the leads.

The last benchmark German Pfandbrief, a EUR500m 10 year issue for WL Bank on Thursday, was also priced in the middle of initial guidance, at minus 13bp, and the size of the book was not disclosed. Some bankers suggested that the deal’s starting point had been too tight compared with previous trades on the primary market and also partly attributed the limited demand to recent heavy supply out of Germany.

“It’s a similar story to WL,” said a syndicate banker away from the leads. “Even though Aareal came only 1bp tighter for an almost four year shorter trade, it looks like investors were still unconvinced at these levels.”

Bankers said Aareal’s deal offered a new issue premium of around 3bp-4bp versus the issuer’s extrapolated curve, seeing Aareal July 2022s at around minus 18.5bp, mid. Outstanding 2024 benchmarks from fellow triple-A rated German issuers were mostly seen trading between minus 21bp and minus 18bp.

The final spread was 2bp wider than the most recent seven year benchmark from Germany, a EUR500m issue for BayernLB that was priced at minus 16bp on 12 March, and 3bp wider than the last five year, a EUR1bn issue for Helaba on 13 March.

Länsförsäkringar Hypotek leads Danske, Deutsche Bank, NordLB, SG and UBS launched the EUR500m no-grow seven year issue with guidance of the mid-swaps flat area this morning. The spread for the CBPP3-ineligible deal was set at minus 1bp with books over EUR650m.

The final spread was deemed to have incorporated a new issue premium of around 5bp, with bankers seeing LF Hypotek March 2024s at minus 6bp, mid, and SCBC January 2025s – the last seven year benchmark from Sweden, having been priced on 22 January – at minus 8bp, the same level as it was initially priced.

Bankers said the stronger demand for LF Hypotek reflected that it’s spread was substantially wider than Aareal’s, and that the deal paid an attractive premium versus the last Swedish supply.