Commerzbank gunned for size while printing a EUR1bn long five year today (Wednesday), building one of the biggest books for a euro Pfandbrief this year, while Spain’s Cajamar decided to wait for stability in peripheral govvies before launching a five year cédulas that had been expected this morning.

Cajamar Caja Rural announced a mandate yesterday for a five year euro benchmark cédulas hipotecarias, via leads BBVA, Crédit Agricole, Raiffeisen Bank International, Santander and UBS, but the deal did not emerge this morning. Syndicate bankers at the leads said it could be launched tomorrow.

“We announced Cajamar with a view to be ready to pull the trigger on the back of investor feedback, but we felt this morning that the level of volatility in southern European government bonds was still too elevated,” said a syndicate banker at one of the leads. “We also felt it would make sense to see what Commerzbank achieved.”

Government bond yields rose across the Eurozone this morning after hawkish comments from ECB chief economist Peter Praet surprised market participants, with southern European government bonds most affected.

Commerzbank’s new issue is its largest covered bond since September 2014, when it printed a EUR1bn five year, and stands out from recent German supply due to its size. Of the 21 euro benchmark German Pfandbrief benchmarks issued previously this year, only three were sized EUR1bn or larger.

Commerzbank announced a mandate yesterday morning for its September 2023 euro benchmark mortgage Pfandbrief. Leads Crédit Agricole, Commerzbank, Danske Bank, DekaBank and HSBC launched the deal with guidance of the mid-swaps minus 4bp area this morning.

Guidance was then revised to the minus 6bp area, plus or minus 1bp will price within range, with books over EUR1.3bn, excluding joint lead manager interest. The spread was subsequently set at minus 7bp and the size at EUR1bn, with books over EUR1.4bn, excluding JLM interest.

The book is one of the largest for a euro benchmark Pfandbrief this year.

“It is a very good trade,” said a syndicate banker at one of the leads. “Without overpaying they got the size, paying a new issue premium in line with what peers have been paying so far this week.

“They came to the market with a very fair approach towards pricing, but at the end of the day we were able to tighten the spread 3bp while achieving a great level of granularity and getting a book well above EUR1.4bn. It was a straightforward trade in a market that was not easy to navigate, with volatility in peripheral government bonds and even in some financial markets.”

Bankers at and away from the leads said the deal offered a new issue premium of 6bp-7bp based on Commerzbank’s curve, seeing its November 2023s at around minus 14bp, mid, and its July 2024s at around minus 13bp. The deal was priced 2bp back of a EUR500m five year mortgage Pfandbrief for Hamburger Sparkasse yesterday (Tuesday).

“I think they could have gone tighter, but clearly they were going for size,” said a syndicate banker away from the leads.

The deal is Commerzbank’s fourth euro benchmark Pfandbrief in only three months. Its last was a EUR500m seven year on 18 May.

Following a mandate announcement yesterday (Tuesday), Stadtsparkasse München lead BayernLB launched its EUR250m no-grow six year mortgage Pfandbrief with the spread fixed at mid-swaps minus 6bp. The books closed two hours after launch, and the size of the book was not disclosed.

The deal is the German savings bank’s second sub-benchmark Pfandbrief, following a EUR250m 10 year debut in September. The Stadtsparkasse München September 2027s were seen at minus 6bp, mid, pre-announcement, but bankers said the deal was of limited use as a comparable for today’s trade due to its illiquidity.

Syndicate bankers at and away from the leads said the new issue paid a premium of around 4bp, based on the secondary levels of recent benchmark Pfandbriefe.