Berlin Hyp attracted an encouraging EUR950m of demand to a EUR500m no-grow seven year green Pfandbrief today (Friday), after having chosen to bide its time when conditions were worse yesterday, although the transaction showed that new issue premiums remain elevated.

The German bank finished a roadshow on Wednesday and was thereafter ready to pull the trigger on its new issue, with its prospects looking reasonable in the wake of a successful SR-Boligkreditt EUR750m seven year deal that day – the first benchmark covered bond in over a week of volatile and nervous markets.

However, market conditions deteriorated again late Wednesday, with US equities falling sharply and Asian stock markets following them lower overnight, and the outlook was deemed unfavourable by Berlin Hyp and its leads yesterday (Thursday) morning.

The deal was then launched this morning on the back of a more constructive opening.

“It was the right decision, even if the deal was doable yesterday,” said a syndicate banker at one of the leads. “This morning equities were in positive territory, the Bund was ticking lower in cash, and the market was in more of a risk-on mode.

“The deal went pretty smoothly.”

Leads ABN Amro, BayernLB, Commerzbank, Crédit Agricole and JP Morgan opened books for the EUR500m no-grow seven year issue with initial guidance of the mid-swaps minus 4bp area. This compared with fair value put at around 13bp through mid-swaps, with Berlin Hyp February 2025s at minus 14bp, mid, and February 2026s at minus 12bp.

Around an hour later, a book update of above EUR600m, including EUR50m joint lead manager interest, was given. The lead syndicate banker said that being able to provide that update relatively soon gave investors reassurance and the deal additional momentum. Two hours after launch guidance was revised to minus 6bp, plus or minus 1bp will price within range, on the back of books over EUR850m, including JLM interest. The books were closed half an hour later at EUR950m and the spread set at minus 6bp.

This implied a new issue premium of as much as 7bp, similar to that paid by ING-DiBa on the EUR1bn five year part of a EUR1.5bn dual tranche deal on Tuesday of last week (2 October). Some bankers noted that the NIP could be considered slimmer if based on a level of 10bp through for the most recent seven year German Pfandbrief benchmark, a EUR1bn Helaba deal. A banker away from the leads said a re-offer level of 7bp had been tested but decided against.

“The book of EUR950m is a strong result,” he added. “We only have the 10% participation from the Eurosystem now, and it is a positive sign to see private investors coming back at these levels – this attracted a lot of the regulars.”

The lead syndicate banker said the green nature of the transaction helped attract incremental demand.

“If you strip away the green element, it’s a classic German Pfandbrief, with the associated tight levels,” he said. “Here, the greenness helped us give bigger book updates and that only added to the momentum.”

He said German constituted the bulk of demand, as expected, but that other jurisdictions were well represented, including the Nordics and the Netherlands, typically strong green constituencies.

Syndicate bankers were pleased to end the week on a positive note, but noted that the constructive tone could prove short-lived, as it did after SR-Boligkreditt’s deal.