ING-DiBa showed the wider clearing levels for Pfandbriefe in today’s market with a EUR1bn five year at mid-swaps minus 6bp today (Tuesday), part of a EUR1.5bn dual tranche deal, also incorporating 15s, that is the issuer’s biggest benchmark. Berlin Hyp has mandated a new green Pfandbrief.

ING-DiBa’s new issue is the German ING unit’s first benchmark Pfandbrief since November 2016, when it sold a EUR500m 10 year. It is the largest German Pfandbrief since Helaba sold a EUR1.5bn dual tranche deal in mid-March.

Leads BNP Paribas, Deutsche, ING, NordLB, Swedbank and UniCredit went out with initial guidance of the 5bp through mid-swaps area for the five year tranche, and 5bp over mid-swaps for the 15 year.

The 15 year tranche’s pricing was soon set at 5bp over and its size at EUR500m, with some EUR700m of orders, while the five year was ultimately priced at 6bp through mid-swaps and sized at EUR1bn on the back of a book of some EUR1.1bn.

Syndicate bankers away from the leads said the five year’s pricing showed the new clearing levels for German Pfandbriefe, particularly those above EUR500m. One highlighted that a EUR250m tap of a Berlin Hyp May 2023 Pfandbrief was priced at 10bp through after the market reopened in August, while the last five year German Pfandbrief, a EUR500m five year for Aareal in early September, was priced at 9bp through.

“We haven’t seen minus 6bp for a German five year covered bond for some time,” said a syndicate banker. “Maybe we are in sort of a new world.”

The deal is only the second Pfandbrief to be priced since typical Eurosystem orders for CBPP3-eligible benchmarks were cut from 30% to 10% of deal sizes, the first having been a EUR500m 10 year social public sector Pfandbrief for Deutsche Kreditbank last Tuesday, which was priced at minus 3bp.

“Issuers and investors are aware of the diminished support of the ECB,” said another banker, “and investors are less incentivised to buy because they know spreads will go wider.”

Bankers away from the leads said the new issue premium was at least 7bp, with one putting fair value at around minus 13bp and others noting that comparables can trade even tighter but acknowledging that these can be squeezed, notably ING-DiBa’s own 2026 at minus 17bp. They said they had expected the five year to be priced perhaps 1bp tighter, but said the EUR1bn size could explain the 6bp through spread.

The 15 year maturity is rare for the German Pfandbrief market, making comparisons difficult, but bankers away from the leads said the approach and result were reasonable.

One noted that French paper trades around 5bp over and that a new French 15 year would have to pay a premium over this, and said that the exercise represented “uncharted territory” in being a 15 year benchmark at a mid-single-digits level. Another said that the difference between the five and 15 year pricing made sense looking at other curves.

Berlin Hyp is planning a third green Pfandbrief following a roadshow beginning on Monday. ABN Amro, BayernLB, Commerzbank, Crédit Agricole and JP Morgan have the mandate for what is expected to be a medium to long-dated EUR500m no-grow issue.

Berlin Hyp last sold a green Pfandbrief in June 2017, a EUR500m long six year.