BayernLB quickly wrapped up a EUR500m no-grow Pfandbrief this (Monday) morning that is the tightest 10 year of 2019, and reintroduced WPIR language after last week’s exuberant market dynamics. Aareal has mandated a five year, but a slowdown is foreseen after last week’s breakneck pace.

Today’s new issue and mandate come after EUR16bn of supply from 17 issuers last week (including a EUR500m tap by Helaba on Friday), which took year-to-date supply to EUR33.75bn. The month is already the busiest since January 2011 and last week was the second busiest ever, after the opening week of 2011.

BayernLB announced its mandate on Friday and this morning leads BayernLB, BNP Paribas, Commerzbank, Natixis and NatWest went out with guidance of the mid-swaps plus 10bp area plus or minus 2bp, will price in range (WPIR), for the EUR500m no-grow public sector Pfandbrief.

After a little over half an hour the books were above EUR600m, excluding joint lead manager interest, according to an update from the leads, and the spread was fixed at 8bp over on the back of books above EUR800m a quarter of an hour later. Books were closed after a total of an hour and 20 minutes with some EUR1.2bn of demand good at re-offer and 60 accounts involved.

The spread is 1bp back of where Helaba’s EUR500m tap of its March 2028 Pfandbrief was priced on Friday, and the last German 10 year benchmark, a EUR750m issue for DZ Hyp last Wednesday, was priced at 10bp over and quoted at 7.5bp, mid, ahead of BayernLB’s announcement.

Today’s new issue is the tightest 10 year euro benchmark covered bond of the year and a lead syndicate banker said today’s new issue is arguably the tightest of any this year taking into account its maturity.

A syndicate banker away from the deal said the pricing was “no surprise”, and market participants noted that the secondary market performed last week and that all the year’s new issues have tightened from re-offer.

BayernLB priced a EUR500m six year at 4bp over on 4 January and, alongside Bank of Nova Scotia, was the first of several issuers to limit from the outset the tightest level their respective new issues would be priced at, using “will price in range” language. However, amid last week’s frenzy issuers did not restrict themselves thus – to the frustration of some investors – leading a syndicate banker away from today’s deal to say he had thought the WPIR practice was “water under the bridge”.

But the lead banker said that, particularly with Pfandbrief being the tightest product and BayernLB being one of the tightest names, it was felt that investors would be more prepared to commit quickly if they knew the tightest possible spread from the start.

“This is the opposite to what we saw in some parts last week,” he added, noting that pricing had been moved as much as 5bp from the middle of initial guidance to re-offer. “After all, we know where this should be priced.”

Germany and Austria were allocated 74.6% of today’s new issue, the Benelux 12.3%, Switzerland 5.7%, southern Europe 2.6%, Asia 2.0%, Nordics 1.8%, and others 1.1%. Asset managers took 37.0%, banks 35.2%, central banks and official institutions 11.6%, insurance companies 11.2%, and savings banks and cooperative banks 5.1%.

The lead banker said the 10 year maturity had since last week proven very successful, but it remained to be seen how long it would remain so popular, particularly in light of the heavy supply, also in the SSA sector.

Aareal Bank has mandated a five year euro benchmark mortgage Pfandbrief that is expected tomorrow via Commerzbank, DekaBank, DZ, Natixis and UniCredit. Its July 2023s and July 2024s were quoted at 3bp, mid, pre-announcement, while five year deals for Commerzbank and Deutsche Pfandbriefbank launched this month have tightened from 6bp and 8bp, respectively, to 4bp and 5bp, and BayernLB’s six year from 4bp to 2bp.

Bankers expect a quieter week than last, but as well as Aareal, more core Eurozone and Nordic names are anticipated.