A EUR500m nine year Pfandbrief for DG Hyp was twice-subscribed and swiftly executed today (Friday), with its size helping it come flat to a shorter but larger Commerzbank benchmark two days ago. The risk of further disruptive ECB headlines next week was cited in relation to its atypical Friday launch.

Following a mandate announcement yesterday (Thursday) afternoon, leads BayernLB, Deutsche, DZ, Erste and Natixis launched DG Hyp’s EUR500m no-grow mortgage Pfandbrief with guidance of the mid-swaps minus 4bp area this morning. Around 40 minutes after launch, the leads announced that books had exceeded EUR600m, excluding joint lead manager interest.

Guidance was subsequently revised to the minus 6bp area, plus or minus 1bp will price within range, with books over EUR800m, excluding JLM interest, and just over 10 minutes later the spread was fixed at minus 7bp with books over EUR900m, excluding JLM interest. The final book stood over EUR1bn, excluding JLM interest.

Syndicate bankers highlighted the speed of the trade, with books closing just one hour and 45 minutes after launch.

“Investors are clearly quite happy with these new spread levels in German Pfandbriefe and are willing to get involved,” added one.

Syndicate bankers at and away from the leads said the deal paid a new issue premium of 4bp-5bp, seeing DG Hyp September 2026s at minus 13bp, mid, and 2026-2027 paper from other German cooperative issuers at minus 13bp-12bp.

On Wednesday, Commerzbank printed a EUR1bn long five year Pfandbrief at minus 7bp. Syndicate bankers said Commerzbank had paid up in order to print in size and DG Hyp had been able to match its spread in spite of its deal being almost four years longer thanks in part to its limited size.

A syndicate banker said the issuer and its leads decided to launch the deal on a Friday, a day sometimes avoided by issuers, rather than next week in case market conditions deteriorate once again. Hawkish comments from ECB officials this week triggered volatility in government bond yields and signalled the importance of the next ECB governing council meeting, to be held in Latvia next Thursday.

“Even though it is a Friday, we were looking at the most recent statements from the ECB and were aware there could be more to come next week regarding QE tapering, potentially causing some new volatility,” he said. “Therefore we decided to go ahead and use this window.”

He added that the deal could have been launched yesterday, but the issuer and its leads decided to wait another day after Commerzbank came to the market.

“With Commerzbank coming to the market relatively cheap, there was a bit of a shift in the Pfandbrief curves, so we decided to wait and see how that deal worked, on secondaries” he said. “It was trading at minus 8.8bp yesterday, performing by almost 2bp, so that was a good sign especially compared to recent weeks.”

In March, a long-discussed merger of DG Hyp and WL Bank – both members of the DZ group – was agreed. The merger will take place on 1 July and the closing date will be effective retroactively from 1 January 2018.

Syndicate bankers said the demand for today’s deal showed that investors are comfortable with the merger.

“It is nothing to worry about for investors,” said a syndicate banker. “If you look at the collateral types and the cover pool, it is effectively a merger between equals.”

Møre Boligkreditt completed a European roadshow marketing a euro sub-benchmark covered bond yesterday, and this morning announced a mandate for a EUR250m five year issue expected to be launched early next week, subject to market conditions.

Syndicate bankers at the leads saw Møre Boligkreditt June 2022s at 3bp, mid, today. Outstanding 2023-2024 benchmarks from larger Norwegian issuers were seen trading from minus 4bp to flat, mid.