Heleba printed a EUR1.5bn dual-tranche, five and 10 year deal today (Tuesday) upon a combined EUR1.8bn book, finding sufficient demand to go above its minimum size target for the EUR1bn five year, having paid the premium now demanded by the market for Pfandbriefe.

Landesbank Hessen-Thüringen (Helaba) announced a mandate yesterday afternoon for a dual-tranche deal comprising a five year mortgage Pfandbrief with minimum size of EUR750m and a 10 year EUR500m no-grow public sector Pfandbrief.

The five year tranche was launched with guidance of the mid-swaps minus 15bp area and the EUR500m 10 year tranche with guidance of the 12bp area. After one and a half hours the leads announced that combined books had exceeded EUR1.3bn, including EUR85m joint lead manager interest.

Guidance for the five year tranche was subsequently revised to the minus 16bp area, plus or minus 1bp will price within range, and for the 10 year tranche to the minus 13bp area, plus or minus 1bp will price within range, upon combined books of EUR1.8bn, including EUR160m joint lead manager interest.

The size of the five year tranche was later fixed at EUR1bn and its spread at minus 17bp and the spread of the 10 year at minus 14bp.

Commerzbank, Crédit Agricole, Deutsche, DZ, Helaba, NordLB and UniCredit were leads.

The dual-tranche offering is the largest deal in the German Pfandbrief market since January 2017, when Helaba printed a EUR2bn trade comprising a EUR1.25bn five year tranche and a EUR750m 10 year.

“When you consider the JLM orders, the oversubscription is by no means huge,” said a syndicate banker away from the leads. “But they went for size on the five year and were able to go above the EUR750m minimum target, pretty comfortably getting EUR1bn in the end.”

The deal is Helaba’s second benchmark Pfandbrief offering of the year, following a EUR750m six year issue on 1 February, which was priced at mid-swaps minus 20bp.

Bankers said the pricing of the new five year issue 4bp wider than the earlier six year trade was a reflection of how the primary market has developed since the start of February, with investors having become increasingly selective. This was also demonstrated by a EUR500m seven year issue for BayernLB yesterday (Monday), which was, at minus 16bp, priced only 1bp tighter than a EUR500m 10 year for the same issuer in January.

The Helaba February 2024s were seen trading at around re-offer today. With syndicate bankers also citing outstanding five to 10 year Pfandbriefe of the tightest-trading German names between minus 22bp and minus 19bp, Helaba’s new five and 10 year deals were deemed to have paid new issue concessions of around 4bp and 5bp, respectively, versus secondary levels.

“If you compare the spreads of both the five and 10 year to the spread of yesterday’s BayernLB seven year, and the spreads of recent trades, you see that this is simply the price at which Pfandbriefe are printed these days,” said a syndicate banker away from the leads. “This is what the market demands.”