Berlin Hyp sold the first 10 year euro benchmark of the year to come through mid-swaps today (Wednesday) and achieved a twice covered deal despite some drops at the negative re-offer. Nationwide meanwhile drew EUR3bn of demand to a five year, its spread outweighing renewed Brexit noise.

After Berlin Hyp’s EUR500m no-grow 10 year mortgage Pfandbrief was announced yesterday (Tuesday), leads BayernLB, Commerzbank, DekaBank, DZ and UniCredit went out with guidance of the plus 2bp area this morning.

They reported books above EUR1bn, including EUR70m joint lead manager interest, after a little over an hour, then revised guidance to mid-swaps flat plus or minus 2bp, will price in range, on the back of books above EUR1.2bn after a little under an hour and a half. The pricing was ultimately set at minus 2bp.

A syndicate banker at one of the leads said that the leads lost “more than a little bit” of demand upon final pricing, with the book dropping from almost EUR1.3bn to EU1bn of allocatable orders.

“But this means it was still two times done,” he added, “so you can’t chide the issuer. It was a very decent transaction.”

Banks have been notably significant buyers of recent long-dated supply, as they extend duration in search of positive spreads, and the lead banker said that banks were foremost among those that dropped out of Berlin Hyp’s trade when it was priced at minus 2bp.

“People have become used to almost no or no new issue premium,” he added, “and we put fair value at minus 2bp, or minus 3bp if you look at it a touch more aggressively, so this had no to virtually no new issue premium.”

Nationwide Building Society attracted some EUR3bn of orders to its EUR1.25bn five year issue, with its 9bp spread cited as an attraction, particularly in the shorter maturity, and investors apparently willing to overlook Brexit-related concerns.

Leads HSBC, LBBW, NordLB and UBS went out with guidance of the mid-swaps plus 13bp area for the five year euro benchmark, and after around two and a half hours set the spread at 9bp and the size at EUR1.25bn, with the final book in excess of EUR2.9bn, pre-reconciliation.

A lead syndicate banker said the deal had gone better than expected.

“Looking at the recent performance of UK covered bonds and the narrowing of the gap to other countries, combined with some potentially upcoming negative headlines, we thought maybe there could be some resistance,” he said. “But looking at the development of the trade, this was clearly not the case.”

A Lloyds EUR1.5bn five year issued on 18 March at 18bp over mid-swaps had tightened to 9.5bp, mid, according to pre-announcement comparables circulated by the leads, while a Santander UK EUR1bn five year issued two weeks ago at 10bp was at 7.5bp, mid. The lead banker said Nationwide tends to trade a little inside Lloyds and that the new issue was priced roughly flat to fair value.

“There was some price sensitivity,” he added, “but the book held up well. Its size allowed Nationwide to go for a slightly larger chunk, EUR1.25bn, without paying up for the additional amount.”

A banker away from the leads said investors appear unfazed by renewed parliamentary political machinations in the UK.

“And at plus 9bp, UK covered bonds are still fairly cheap versus those from the continent,” he said.

The deal was priced with a 0.05% coupon and 0.06% yield.

“It is one of those ‘not to be missed’ coupons,” the banker added.