A €500m six year Pfandbrief for Deutsche Pfandbriefbank (pbb) struggled today (Wednesday), with pricing in the middle of initial guidance and a lack of book updates leading bankers to surmise that the deal was not fully subscribed. Hypo Tirol is expected with a €500m seven year tomorrow.

Leads DekaBank, Helaba, Santander, Swedbank and UniCredit went out with initial guidance of the 5bp over mid-swaps area for the €500m no-grow six year deal and, according to syndicate bankers away from the leads, no book updates were distributed before or after the new issue was priced at 5bp over.

They said it was not obvious why the deal had struggled, but pointed at the pricing.

“I guess the guidance was deemed too aggressive by investors,” said one. “To me it didn’t feel crazy given the capped size and the six year maturity – we haven’t seen much except seven or 10 years lately. I would have expected sufficient demand.”

He put fair value at 1bp over mid-swaps, based on outstanding pbb 2027 paper trading at 2bp, while another syndicate banker away from the leads put the new issue premium at 4bp-5bp.

“That looked OK,” he agreed.

However, given the lack of demand, they suggested many investors had been lukewarm towards the initial guidance. One said potential buyers may have therefore waited for a book update before committing to the trade, but that when this was not forthcoming, the deal failed to gain momentum.

The other banker said that the deal’s problems will have been compounded by pbb already having a more limited investor base than most other Pfandbrief issuers yet being a regular issuer. They therefore said pbb would have been better advised to start with wider initial guidance.

Despite noting that the funding level ultimately achieved by pbb was not a bad result for pbb, a banker said that the deal’s performance in the secondary market could determine whether it affects the issuer going forward.

“If it trades at plus 7bp, it will be a wide point on the curve and people will reference that,” he said.

He suggested the shorter, six year maturity versus recent seven and 10 year supply, and hence more negative yield, was not a factor, but another banker said it could have contributed to the lack of demand.

The fate of the deal was not deemed as having too much read-across for other supply.

“I’m not too worried,” said a syndicate banker. “OK, we don’t have €2bn books anymore, but you don’t need that, unless you’re a special case like CRH’s comeback.”

Hypo Tirol Bank AG is expected with a €500m no-grow mortgage Pfandbrief via Commerzbank, DekaBank, DZ, Erste, LBBW and RBI tomorrow (Thursday), and a syndicate banker at one of its leads said he does not anticipate any problems in the wake of pbb. He noted that the Austrian bank is not a frequent issuer.

The last Austrian seven year benchmark was a €500m no-grow deal from Hypo Noe on 24 September, which was priced at plus 8bp and, according to comparables circulated by the leads, was trading at plus 7bp, mid, ahead of the announcement today of Hypo Tirol’s mandate.