HSH Nordbank achieved one of the highest levels of oversubscription for a German Pfandbrief this year today (Wednesday), with some EUR1.4bn of demand for a EUR500m three and a half year deal offering a rare mid-swaps plus spread, while Belfius was able to smoothly raise EUR750m in five years.

Markets have proven more stable and accommodating this week and the success of a EUR1.75bn five year deal for Bank of Nova Scotia yesterday (Tuesday) provided further evidence of latent demand for covered bonds.

However, bankers said that market sentiment remains unpredictable, meaning issuers have to consider whether to announce mandates the day before launch or aim for intraday execution.

“You are just one tweet away from having the market turn,” said one.

According to a syndicate banker at one of its leads, HSH Nordbank opted to announce its mandate yesterday afternoon, targeting launch today, because of its chequered history.

“It is not the most straightforward Pfandbrief out there, with its ownership changing, for example” he said. “Quite a few investors don’t have lines for it, so in HSH’s case we needed to have the right info by the time we opened books.”

Leads Crédit Agricole, Commerzbank, Goldman Sachs, HSH and Natixis opened books for the EUR500m no-grow April 2022 mortgage Pfandbrief with initial guidance of the plus 18bp area, versus fair value put at 9bp-10bp over.

“This was an extremely wide spread for a German Pfandbrief,” said a banker away from the leads, “but it looked like everything went fine.”

HSH Nordbank’s deal is one of only two German Pfandbriefe to have offered a positive spread versus mid-swaps this year, the other having been a EUR500m five year deal for the issuer in July, which was priced at 18bp.

“Two things clearly worked in our favour,” said the lead syndicate banker. “The tenor – which is quite defensive and has not been seen much –coupled with the fact that it is clearly in positive territory versus mid-swaps, and a lot of investors in Germany and elsewhere still look at the pick-up versus the Bund.

“Those two factors offset the noise around the name, and the order book built quite fast and then steadily.”

After a first EUR750m book update, guidance was revised to the 15bp area, plus or minus 1bp will price in range, on the back of EUR1.1bn of demand, and the issue was ultimately priced at 14bp over on the back of as much as EUR1.4bn of orders.

“People who participated are comfortable with the name and know they are already getting extra spread,” said the lead syndicate banker, “so there was little price sensitivity given the size of the book and the EUR500m no-grow size. Beating 15bp was the objective and it was a nice way to do that.”

German accounts took around two-thirds of the paper.

Belfius was able to hit the market for intraday execution, with a syndicate banker at one of its leads saying that the issuer had been keen to avoid overnight risk but also to consider any competing supply. He noted that for Belfius there was no issue with wondering if investors have lines in place.

Leads Barclays, Belfius, Crédit Agricole, DZ, LBBW and Nordea opened books for the benchmark-sized five year at initial guidance of the 2bp over mid-swaps area. Following a book update of EUR750m, the spread was fixed at mid-swaps minus 1bp on the back of more than EUR1bn of orders, and the final book size at re-offer was put at EUR900m, including EUR92.5m of joint lead manager interest.

“It was a very nice trade,” said the lead syndicate banker, noting that Belfius had been able to go beyond the minimum EUR500m size to EUR750m.

He put the new issue premium at 4bp-5bp, versus 7bp-8bp at initial guidance.

“Everything is starting with very high new issue premiums, of 8bp-10bp initially,” he said. “I think secondary markets can only move wider in light of this.”