Berlin Hyp is set to issue what will be the longest-dated negative-yielding euro benchmark covered bond tomorrow (Wednesday), a EUR500m eight year green Pfandbrief, after DZ Hyp successfully executed its third 10 year-plus benchmark of the year. TD wrapped up a $1.75bn three year yesterday.

DZ Hyp leads BNP Paribas, DZ, Helaba, ING, TD and UniCredit this (Tuesday) morning opened books with guidance of the 3bp over mid-swaps area for a euro benchmark-sized 10 year mortgage Pfandbrief, rated AAA by S&P.

After around 40 minutes the leads reported books above EUR1bn, excluding JLM interest, and after an hour and 20 minutes the spread was set at minus 1bp and the size at EUR750m on the back of well above EUR1.8bn of orders, including EUR85m JLM interest. The final order book good at re-offer was above EUR1.7bn.

A lead syndicate banker said the deal was “all very straightforward” and went very well.

“Everybody’s pleased,” he said, “in particular the issuer, but we as a lead group liked it very much as well.”

DZ Hyp’s outstanding EUR750m 0.875% January 2029 paper was quoted at 2bp through mid-swaps, mid, according to pre-announcement comparables circulated by the leads when the deal was announced yesterday afternoon, and the lead banker said that, adding around 0.5bp for the curve extension to the new 0.05% July 2029, the new issue came roughly flat to fair value.

“Not everyone followed it down to less 1bp,” he added, “but the overwhelming majority stayed in and we therefore had a very nice oversubscription in the end.”

German accounts were allocated 65.7%, Austria and Switzerland 9.7%, Scandinavia 9.3%, Asia 5.1%, southern Europe 5.1%, France 3.5%, and others 1.6%.

“The Germans are happy buying themselves,” said the lead banker, noting that, in spite of spread compression, there was still “a bit of a gap” to France, with SG SFH, for example, having priced a EUR1bn 10 year green covered bond at plus 4bp yesterday (Monday).

Banks took 52.1% of today’s Pfandbrief, official institutions and central banks 19.5%, funds and asset managers 25.0%, corporates 2.9%, and insurance companies 0.5%. Eighty-eight accounts were involved.

A banker away from the leads acknowledged the success of the deal, but remarked that the yield of 0.11% still appears “ludicrous”. The new issue offered a spread of 47.2% over the Bund.

Having already sold a EUR750m 10 year in January and a EUR500m 15 year in April, DZ Hyp opted for another long-dated trade to offer investors a positive yield, according to the lead banker.

Berlin Hyp is set to test appetite for negative-yielding paper as far out along the curve as eight years tomorrow (Wednesday), following the announcement this morning of a EUR500m no-grow green mortgage Pfandbrief via Crédit Agricole, HSBC, JP Morgan, LBBW and Natixis.

The deal will be the longest-dated negative yielding euro benchmark covered bond and, according to a banker away from the leads, also longer than any euro benchmark in the SSA market, where he said the record is five years. The previous longest-dated covered bond benchmark was a EUR1.25bn six year issue from CIBC in July 2016.

Berlin Hyp in November 2017 issued the first negative-yielding euro benchmark covered bond, a EUR500m three year issue, and followed that up with a negative-yielding EUR500m four year in November 2017.

The first negative-yielding euro benchmark since then was a EUR750m five year for Helaba last month (26 June), but a handful of other issuers to have launched euro benchmarks before and after that have chosen longer maturities specifically to avoid offering a negative yield.

“It will be interesting to see how Berlin Hyp goes,” said one syndicate banker.

Toronto-Dominion Bank priced a $1.75bn (EUR1.56bn, C$2.29bn) three year 144A/Reg S covered bond inside recent deals from its compatriots yesterday, and added a $400m two year tranche on the basis of a reverse enquiry.

Leads BMO, Citi, ING, NAB and TD went out with initial price thoughts of the 30bp over mid-swaps area for the three year deal and the book peaked at $1.94bn before the deal was priced at 28bp over and sized at $1.75bn on the back of a final $1.85bn book.

The spread is inside those of 29bp and 30bp achieved by $1.75bn Bank of Montreal and $1bn National Bank of Canada trades, respectively, last month.

A syndicate banker at one of the leads said the pricing reflected a new issue premium of 1bp and offered TD funding inside where it could have issued in its home Canadian dollar market. He noted that the issuer had also locked in an attractive 31bp differential between senior and covered bonds.

The issuer added a $400m two year tranche on the basis of a reverse enquiry, according to the lead banker, taking the total raised to $2.1bn. Including the shorter-dated tranche, the transaction exceeds the sizes raised by the previous three 144A/Reg S covered bond trades this year, with a $2bn five year for Westpac in January the only other supply this year beyond last month’s two Canadian issues.