UniCredit HVB played it safe with a EUR750m five year mortgage Pfandbrief today (Tuesday), while euro supply is set to step up a gear tomorrow, with Crédit Agricole, Deutsche Hypo and Erste expected to hit the market – the latter with the longest negative-yielding euro benchmark covered bond yet.

The trio are due after one euro benchmark in each of the last two weeks, and one each of yesterday (Monday) and today.

“That’s three jurisdictions, three different maturities – there’s something for everybody,” said a syndicate banker. “Just pick what you fancy most.”

UniCredit Bank AG (HVB) entered the market this morning after having announced its mandate yesterday, with leads Commerzbank, DZ, Helaba, Santander and UniCredit opening books for the five year euro benchmark-sized mortgage Pfandbrief with guidance of mid-swaps plus 2bp-4bp, will price in range (WPIR).

Almost an hour and a half later the leads reported books above EUR500m, including EUR45m joint lead manager interest, and after around an hour and 50 minutes the spread was set at 3bp over on the back of orders above EUR700m. The deal was ultimately set at EUR750m on the back of orders totaling EUR940m, including EUR70m JLM interest.

According to comparables circulated by the leads, UniCredit HVB’s September 2022 paper was quoted at minus 6bp, mid, and its October 2023s at minus 5bp, and a lead syndicate banker put fair value at around minus 4bp.

“In the beginning, it was probably a little on the slow side, but eventually it was a very nice transaction,” he said, “with EUR750m at the middle of the range, which the issuer appreciated.”

A syndicate banker away from the leads said the use of WPIR helped in execution.

“It showed that there was still going to be some new issue premium in there,” he said. “Given it was announced as a euro benchmark, investors knew the issuer was going to try to do size, if possible, so they were maybe waiting a little bit on the sidelines to see how it was going to be priced. In the end they printed a very nice EUR750m at 3bp.”

Returning minus 0.511%, UniCredit HVB’s deal is the third German benchmark to come below the ECB deposit rate in two weeks, with Berlin Hyp having sold a EUR1bn three year on 20 August and MünchenerHyp a EUR500m four year on Thursday. The two preceding trades were quoted at minus 2bp ahead of today’s new issue.

“It also makes sense that HVB, which is not as strong a name as MünchenerHyp, is paying more,” added the syndicate banker away from the leads, “especially if you’re going a little bit longer and you’re still below the deposit rate.”

Further short-dated German supply is expected tomorrow, with Deutsche Hypothekenbank having this morning mandated a EUR500m three year mortgage Pfandbrief, via ABN Amro, Commerzbank, DZ, NatWest and NordLB.

According to pre-announcement comparables circulated by the leads, secondary Deutsche Hypo paper in the three year part of the curve was trading at 4bp to 4.5bp through mid-swaps.

“It’s another one of those short-dated Germans, so it will likely work more or less the same pattern as BHH and MünchenerHyp the other day,” said a lead syndicate banker.

Erste, CA to extend negative covereds

Erste Group Bank is expected to tomorrow issue what will be the longest-dated negative yielding euro benchmark covered bond, after the announcement this morning of a EUR500m no-grow 10 year mortgage Pfandbrief for launch in the near future, subject to market conditions, via Erste, HSBC, ING, LBBW and Nykredit.

The deal is set to test investor appetites for negative yielding paper even further out the curve, after Compagnie de Financement Foncer (CFF) sold a EUR1bn eight year covered bond yesterday, yielding minus 0.326%, which is the current longest new issue at a negative yield.

The leads circulated comparables including Erste January 2027s at 1.3bp, January 2028s at 1.5bp and May 2034s at 2bp, as well as noting that the February 2029 Austrian government bond was at minus 14bp.

A mandate for a Crédit Agricole Public Sector SCF nine year obligations foncières benchmark followed, with Crédit Agricole, Lloyds, Rabobank and UniCredit as leads.

“We’re going a bit longer than CFF and we’re giving a little bit more on the yield side,” said a syndicate banker at one of the leads. “I think this is the next step when it comes to negative yielding deals.”

HSBC Bank Canada priced its second covered bond today, a $1bn (EUR912m, C$1.33bn) three year 144A/Reg S US dollar benchmark led by HSBC, BMO, CIBC, Commerzbank, DZ, ING, LBBW, Natixis and RBC.

The spread was set at mid-swaps plus 35bp on the back of over $1.2bn of demand at guidance of the plus 37bp area, plus or minus 2bp.