Commerzbank attracted over €625m of demand to a €500m no-grow long nine year mortgage Pfandbrief today (Monday), suggesting “average” core CBPP3-eligible deals could get despite investors increasingly shutting up shop ahead of the holidays after the busiest November in four years.

After announcing the mandate this morning, leads Commerzbank, Crédit Agricole, Danske, LBBW and Natixis went out with guidance of the mid-swaps plus 4bp area for the €500m no-grow May 2029 trade. After around an hour and 20 minutes, books were reported as being over €500m, excluding joint lead manager interest, and after around two hours and 25 minutes guidance was revised to plus 2bp-3bp, will price in range, on the back of orders over €580m, excluding JLM interest. The spread was ultimately set at plus 2bp on the back of over €625m of orders, pre-reconciliation, excluding JLM interest.

According to pre-announcement comparables circulated by the leads, Commerzbank December 2026 and April 2028 paper were both trading at minus 1bp, mid, while its January 2034 was at plus 2bp. DZ Hyp November 2027 paper was at minus 2bp, LBBW September 2028 at minus 1bp, and Helaba September 2029 at minus 1bp.

A syndicate banker at one of the leads said the “uncontroversial” trade had gone relatively well for early December, given that he saw fair value at flat to mid-swaps and that many investors are close to shutting down for the holidays.

“We had some feedback from investors saying the market was done for the year,” he said, “but overall, we had very solid bookbuilding, a good outcome on pricing, and orders which peaked upwards of €600m, so perfectly fine.”

The lead banker said that although the trade was not a “massive blow-out,” it had good interest from traditional Pfandbrief buyers, and very limited price sensitivity.

“It could not have gone to plus 1bp on this book,” he said, “but if you talked to the issuer, they would be very happy – a €500m no-grow underway and plus 2bp was the target, so mission accomplished!”

A syndicate banker away from the leads said two “chunky” transactions from Crédit Agricole and Santander last week, as well as general reduced enthusiasm from triple A-investors, gave many accounts less reasons to chase the Commerzbank’s deal.

“There’s definitely a sense amongst triple-A investors that they’re shutting up shop a bit,” he said, “as you’re more likely to see materially more triple-A supply come January, so there’s less reason to be going for secondary or primary paper at present, and this trade is probably a reflection of that.”

He said the trade nevertheless showed that it was still possible for core CBPP3-eligible names to get deals done in a relatively “average” execution style.

“This can give some issuers a bit more confidence that with the ECB programme, you can do slightly off-the-run tenors and be a little bit more aggressive over timing and spread as well,” he added. “Even with a €580m order book at the first update, they were still able to move pricing from 4bp to plus 2bp, in part because they know the ECB is going to be there.”

However, the lead banker said he would not be surprised if the Commerzbank deal is the last new euro benchmark covered bond of the year.

“Many issuers will say it’s not that hot a market, so we will wait until next year,” he said. “Obviously spreads for the periphery are attractive, but I don’t really see a core name getting another trade out.”

If the long nine year transaction is indeed the last of 2019, Commerzbank will have accomplished the feat of bookending euro benchmark supply – on 2 January it opened the market with a €1.5bn dual-tranche mortgage Pfandfbrief.

Joost Beaumont, senior fixed income strategist at ABN Amro, noted that – even if the ECB is available to support the market until 19 December – in recent years no more than €1bn of supply has hit the market in December.

November supply of €11.8bn, in contrast, was at its highest level since 2015, according to Beaumont, and up from €9.5bn in October.

“This month’s strong issuance might be driven by the fact that the Eurosystem has restarted net covered bond purchases this month,” he said on Friday.