MünchenerHyp attracted over EUR860m of orders to a EUR500m no-grow four year mortgage Pfandbrief at a yield of minus 0.567% today, confirming the viability of  issuance below the ECB deposit rate. UOB meanwhile reopened dollars with a $500m three year priced mid-guidance.

After the mandate was announced yesterday (Wednesday), leads BayernLB, Credit Suisse, DZ and Helaba went out this morning with guidance of the mid-swaps minus 1bp area for the EUR500m no-grow four year trade. After around an hour and a quarter the leads reported books above EUR650m, including EUR35m joint lead manager interest, and after close to two and a half hours books were in excess of EUR740m and the spread was set at minus 2bp. The final book was above EUR860m with 30 accounts.

“It went very much as anticipated,” said a syndicate banker at one of the leads. “Not too many accounts, but on average pretty sizable orders, so a similar pattern to Berlin Hyp, which was one year shorter but with the same strategy of appealing to banks.”

Another lead syndicate banker agreed there was little to differentiate the outcome from Berlin Hyp’s EUR1bn three year trade on Tuesday of last week that reopened the market and set a record for the lowest yielding benchmark covered bond. That offered a minus 0.588% return while MünchenerHyp offered minus 0.567%, with the two benchmarks both priced at minus 2bp.

The lead banker said that there was more price sensitivity in the book today, possibly because Berlin Hyp went out with guidance of mid-swaps flat to minus 2bp, will price in range, whereas MünchenerHyp was less definite in its minus 1bp area guidance. He said that a minus 3bp print would have been possible considering the quality of the book, but that the issuer decided on minus 2bp.

“It’s a better trade and where we would have ended up if we had started at the flat area,” he added, “so it’s a good result.”

Comparables circulated by the leads ahead of the trade put outstanding MünchenerHyp 2023 paper at around minus 5bp, mid, implying a new issue premium of 3bp. Berlin Hyp’s three year was quoted at minus 2.5bp, mid. The pricing was at 38.4bp over the Bund.

Berlin Hyp’s trade was the first benchmark covered bond to be priced at a yield below the ECB deposit rate, minus 0.40%, and therefore a test for the market following a preceding sharp drop in rates.

“It proved investors are still willing and able to invest in paper like this,” said the MünchenerHyp lead banker, “so we were positive on this one.”

A syndicate banker away from the leads said the new issue very much followed Berlin Hyp’s template.

“As crazy as it seems, these things seem to be working,” he added.

Central banks and official institutions were allocated 47% of the new issue, banks 27%, and asset managers 26%. Germany took 54%, the Nordics 26%, central and eastern Europe 6%, Asia 5%, the Benelux 5%, France 2%, Austria and Switzerland 1%, the Middle East 1%, and others 1%.

United Overseas Bank today issued the first dollar benchmark covered bond since 17 July, the Singaporean bank selling a $500m (EUR451m, SGD694m) three year deal.

Leads Credit Suisse, HSBC, ING, UBS and UOB went out with guidance of the mid-swaps plus 32bp area for a dollar benchmark-sized three year Reg S trade, and a first update put the book above $460m, excluding joint lead manager interest. The deal was ultimately sized at $500m and priced at 32bp, which a lead syndicate banker said was inside fair value.

He said UOB, after having been absent from the market for some time, moved quickly this morning with the “drive-by” Eurodollar transaction.

“They wanted to show an ongoing commitment to the sector in a time-efficient manner, and they have achieved that,” he added, “and the negative new issue premium is a decent result.”