New issues for Deutsche Bank and Hypo Oberösterreich today (Tuesday) showed the covered bond market is “back to the old game” as orders for both peaked at around twice their respective issue sizes, in Deutsche’s case despite a relatively low premium.

The execution of Deutsche’s deal follows encouraging benchmark successes for Caja Rural de Navarra and Raiffeisen-Landesbank Steiermark, but is in contrast to that of supply in mid-April, when new issue premiums rose to as high as 10bp as issuers tried to ensure success amid heavy supply, increased investor selectiveness and lower orders from the ECB.

“What has changed is that secondaries have now followed the move in primary pricing,” said a syndicate banker. “It is now back to the old game, at elevated spread levels.”

Following a mandate announcement yesterday (Monday), Deutsche Bank leads Bankia, Deutsche, DZ, Nordea and UniCredit launched a EUR500m no-grow five year mortgage Pfandbrief with guidance of the mid-swaps minus 5bp area this morning.

After around 50 minutes, the leads announced that books had surpassed EUR550m, excluding joint lead manager interest. Guidance was later revised to the minus 8bp area, plus or minus 1bp will price within range, with books above EUR1bn, including EUR60m JLM interest, before the spread was set at minus 9bp.

“It has gone well,” said a syndicate banker at one of the leads. “We were able to move by 4bp and the deal was still well oversubscribed, even if not all accounts appreciated the move to minus 9bp.”

Syndicate bankers away from the leads agreed.

“The pricing leverage is impressive, as starting at minus 5bp and ending at minus 9bp is as big a move as we’ve seen for something that low beta for a while,” said one. “However, Deutsche do trade a bit wider than some of their peers, so the premium they had to pay was probably smaller.”

Bankers at and away from the leads said the deal paid a new issue premium of around 1bp versus Deutsche’s curve, seeing its June 2022s, March 2024s and August 2025s – the bank‘s most recent benchmark Pfandbrief, having been priced in February – all quoted at around minus 10bp, mid.

Some syndicate bankers noted the deal offered a more substantial pick-up versus the last benchmark German Pfandbrief, a EUR500m five year for DG Hypothekenbank that was priced at minus 11bp on 18 April and seen at around minus 13bp, mid, today.

It is understood that the size of the ECB’s order for the deal was in line with those made for other recent benchmarks, of around 30% of the expected issuance size.

Hypo Oberösterreich held a European roadshow last week marketing a sub-benchmark euro covered bond with an expected maturity of seven to 10 years. Upon completion of the roadshow, the Austrian issuer announced a mandate for a EUR300m no-grow seven year yesterday morning.

The deal was launched this morning with guidance of the mid-swaps plus 8bp area, and after around one hour and 15 minutes, the leads announced that they had taken more than EUR485m of orders, including EUR30m JLM interest.

Guidance was subsequently revised to the 6bp area, plus or minus 1bp will price within range, with books above EUR530m, including EUR30m JLM interest. The deal was then re-offered at 5bp with books above EUR590m, including EUR30m JLM interest.

Commerzbank, Erste and LBBW were the leads.

Bankers noted the deal paid an attractive premium versus benchmark supply from more established Austrian issuers, with seven year benchmark paper seen trading in the low single-digits through mid-swaps.

Bankers said today’s supply showed the primary market to be well-balanced following April’s spread widening, building on Raiffeisen-Landesbank Steiermark’s EUR500m 15 year Austrian covered bond on Thursday that also attracted sizeable demand – of EUR1.2bn – while paying a relatively low premium of around 3bp.

“It is a promising start,” said one.

Expectations for supply this week remain modest, however, with public holidays in Germany and elsewhere in Europe on Thursday set to narrow the window for issuance.