Deutsche Bank SAE sealed an “important” result with a EUR1bn long five year cédulas today (Tuesday) that demonstrated the divergence of Spanish and Italian dynamics. NIBC took over EUR800m of orders for a EUR500m 10 year, while EUR500m Aareal fives were more modest.

Deutsche’s deal is the first benchmark covered bond from the periphery since 18 July, when Banco BPM rounded off a wave of Italian supply, and the first benchmark covered bond from Spain since 7 June, when Cajamar printed a EUR500m five year.

Following a mandate announcement yesterday (Monday) morning, leads BBVA, CaixaBank, Crédit Agricole, Deutsche and Lloyds launched the March 2024 cédulas hipotecarias with guidance of the mid-swaps plus 30bp area this morning.

After around one hour and 20 minutes, the leads announced that they had taken more than EUR1bn of orders. The spread was subsequently set at 27bp with books over EUR1.25bn, excluding joint lead manager interest. The books closed above EUR1.35bn.

“We’re all very happy with the outcome,” said a syndicate banker at one of the leads. “It was quite an important deal for Deutsche as a whole, as Deutsche’s CEO has been vocal about Spain and Italy being core markets for them, where they want to consolidate and continue to expand.

“This transaction out of the Spanish entity is a part of the strategy and it was important to get a solid trade.”

Syndicate bankers at and away from the leads described the EUR1.35bn-plus book as an encouraging result.

They said demand was supported by the recent scarcity of cédulas supply – only EUR2.5bn of benchmark issuance had been sold so far this year – and in particular the rarity of Deutsche SAE – today’s deal is the Deutsche unit’s first benchmark cédulas since December 2016.

The deal was also attractive, bankers said, as it offered a pick-up over the interpolated sovereign curve of around 6bp, and because the initial guidance offered was somewhat defensive, although the leads were able to tighten the spread on the back of the strong demand.

The final spread was deemed to incorporate a new issue premium of 7bp-9bp, with bankers seeing Deutsche Bank SAE January 2023s – the issuer’s longest dated benchmark outstanding – at around 14bp, mid, and estimating extrapolated fair value based on the curves of issuers such as Sabadell and CaixaBank.

The deal’s spread offers a clear example of how Spanish and Italian covered bond spreads have diverged since Italian debt was hit by political uncertainty earlier this year, bankers said, noting that Italian five to seven year benchmarks sold in July were priced between 63bp and 95bp over mid-swaps, with each successive deal priced wider than those that came before.

“It really highlights the difference in dynamics now between the two markets, as demand was very limited for some of the OBG trades in July,” said a syndicate banker.

Bankers said the deal is likely to encourage further Spanish covered bond supply.

“This shows the market is clearly open and is still quite a cheap funding tool for these issuers,” said one.

NIBC announced a mandate yesterday morning for its EUR500m no-grow 10 year covered bond. Leads ABN Amro, ING, LBBW, NIBC Bank and UniCredit and co-lead NordLB launched the EUR500m no-grow issue with guidance of the mid-swaps plus 17bp area this morning.

After around one hour and 50 minutes, the leads announced that books had surpassed EUR650m, including EUR15m JLM interest. Some 40 minutes later, the spread was fixed at 15bp with books “well above” EUR700m, including the EUR15m JLM interest. The final book stood at over EUR800m, including the EUR15m JLM interest.

The deal was deemed to have paid a new issue premium of around 5bp-6bp, with banker citing NIBC April 2022s at minus 4bp, mid, June 2026s at 4bp, and January 2028s at 8bp.

Following a mandate announcement yesterday, Aareal Bank leads DekaBank, Deutsche, Goldman Sachs, HSBC and UniCredit opened books for the German issuer’s EUR500m no-grow July 2023 mortgage Pfandbrief with guidance of the mid-swaps minus 8bp area this morning.

After around one hour and 25 minutes, the leads announced that books had surpassed EUR500m, excluding JLMs. Just over one hour later, the spread was fixed at minus 9bp with books over EUR550m, excluding JLMs.

The deal comes just two weeks after Aareal priced a EUR500m July 2025 issue at minus 8bp – one of two deals that reopened the euro market on 21 August after the summer break. Seeing the July 2025s at around minus 10bp, bankers said today’s new issue paid a premium of around 4bp.

“It is a positive sign that all today’s deals – even Aareal at the tighter end – found a home, given that this month could be quite a busy one,” said a syndicate banker.

Commerzbank’s EUR500m April 2028 issue was reopened this morning with guidance of the mid-swaps minus 4bp area for a minimum EUR250m tap. The spread was later fixed at minus 5bp and the size at EUR250m, lifting the new outstanding size to EUR750m.

Commerzbank, HSBC, Natixis, NordLB and SEB were the leads. The original deal was priced at minus 7bp in April.