Deutsche Bank executed a swift EUR500m no-grow seven year Pfandbrief today (Tuesday), taking advantage of a quiet market and offering clear guidance to attract some EUR1.3bn of demand. A Santander Consumer Bank tap was meanwhile deemed more successful than the original, debut issue.

Supply from financial institutions today was otherwise quiet, with some entering blackout periods and conditions deemed inappropriate for higher beta and subordinated products, although the European Investment Bank and the Republic of Italy proceeded with trades announced yesterday (Tuesday). Although some hesitation on the part of issuers was seen as natural ahead of the UK parliamentary Brexit vote today, and no covered bonds were launched yesterday, syndicate bankers said the market was clearly open.

“In a way, I would have been more surprised if we had continued to not see anything,” said a banker away from today’s supply. “The market has been constructive for covered bonds, with spreads having consolidated at levels where investors are comfortable getting involved, whether it be a German Pfandbrief or an Australian or Canadian name.”

Deutsche Bank announced its EUR500m no-grow seven year mortgage Pfandbrief this morning, with leads ABN Amro, Banca IMI, Barclays, Deutsche and NatWest going out with initial guidance of mid-swaps plus 13bp plus or minus 1bp, will price in range.

“We had quite a free window and the market opened pretty stable,” said a syndicate banker at one of the leads. “And if Italy can preannounce a 15 year for today and go ahead with it, there is very little argument for us not to proceed.”

Within half an hour orders exceeded EUR500m after this was announced in an update books went on to top EUR1.1bn around 20 minutes later, when the spread was set at 12bp. The book ultimately reached EUR1.3bn, with 58 accounts.

“It was great,” said the lead banker, “pretty much textbook execution. Giving the pricing from the start like BayernLB and Helaba helped the momentum since investors know pretty much from the beginning what they are buying.”

Based on fair value of 7.5bp over mid-swaps, he put the new issue premium at around 4.5bp.

Bankers away from the deal said it appeared to have gone very well, with one comparing it favourably to a EUR500m six year Deutsche Bank SAE cédulas last Tuesday that attracted EUR650m of orders and was priced in the middle of guidance, at 57bp over.

“They had EUR1.3bn of demand for the EUR500m, so could have done more,” he added. “It was a decent outcome, particularly considering the headlines around Deutsche Bank and the more defensive market.”

Germany took 77% of the new issue, the UK and Ireland 9%, the Benelux 5%, other Europe 5%, and Asia and others 4%. Banks were allocated 60%, fund managers 33%, central banks 4%, and insurance companies 3%.

Deutsche Bank’s last Pfandbrief benchmark was a EUR500m no-grow five year in May 2018 that was priced at 9bp through mid-swaps. Compatriot LBBW priced a EUR500m seven year at 5bp over on 2 January and Helaba a EUR750m seven year – which was part of a two tranche, EUR2.25bn trade – at 7bp over last Wednesday.

The EUR250m no-grow tap of Santander Consumer Bank’s EUR250m December 2024 Pfandbrief was announced yesterday afternoon and this morning leads LBBW, Santander, SG and UniCredit went out with guidance of the 18bp over mid-swaps area.

A lead syndicate banker said that this morning the outstandings were bid at 13bp over and he said the “conservative” guidance reflected the issuer adopting a more strategic and less aggressive approach than that typically taken for taps, wanting to build up the EUR250m trade to a EUR500m benchmark reference for future issuance.

He said this had been successfully achieved, as the tap attracted around EUR425m of orders to be priced at 16bp over. This is more demand than the EUR380m generated for the initial issue in November 2017, which was Santander Consumer Bank’s first sub-benchmark trade and was priced at 11bp through mid-swaps. The lead banker said that the tap was therefore more successful than the debut and had achieved the issuer’s goals, with around 40 accounts involved, some new to the credit. He said demand was mainly German and primarily from banks, but that the book also included funds, and orders from pension funds and official institutions in the Netherlands and the Nordics.

Syndicate bankers said there is a good chance of further covered bond supply tomorrow (Wednesday) unless the UK parliamentary vote this evening is followed by a move that is “out of the ordinary”, in the words of one.