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Domestic appreciation helps apoBank to tight €500m nines

ApoBank sold a €500m nine year mortgage Pfandbrief at 1bp through mid-swaps yesterday (Thursday), attracting over €1bn of orders at 1bp through mid-swaps, in a trade described by a banker away from the leads as “another tight German deal for the German community”.

Deutsche Apotheker- und Aerztebank (apoBank) leads Commerzbank, DekaBank, Deutsche and DZ went out with guidance of the mid-swaps plus 3bp for the €500m no-grow nine year covered bond and after around an hour and 10 minutes reported books over €825m, including €35m joint lead manager interest. After around two hours and 10 minutes, the spread was set at minus 1bp on the back of over €1bn of demand, including €60m JLM interest.

A syndicate banker at one of the leads said the deal represented a “good success”, coming with a minimal new issue premium and achieving a very granular order book.

“We and the issuer were very, very happy with this one,” he said. “Orders were sticky and did not drop once we said minus 1bp, so all in all, it was a very good shot.”

He highlighted that the issuer’s collateral, comprising mortgages for members of medical professions, is favorably perceived in its domestic market.

“You don’t have that much problem with defaults when lending to a doctor,” he said, “so the collateral is really well placed amongst investors in Germany, and also a couple abroad.”

He said that given it does not come to the market regularly – it launched just one benchmark covered bond in 2019, a €500m no-grow 10 year in November – the name was attractive to investors.

“A number of boxes were ticked to make this fly,” he said, “and with a book above €1bn, it was easy to tighten it by 4bp.”

He saw fair value for the trade at minus 1.8bp, based on its outstanding November 2029 paper trading at minus 2bp, indicating around 0.5bp of new issue premium for the latest deal.

“We’re talking a very flat curve around that maturity,” he said, “so around 0.5bp of NIP, if any at all.”

A syndicate banker away from the leads said the deal was “another tight German deal for the German community”. He saw fair value at minus 1bp, implying zero new issue premium.

“The curve out there is flat as a pancake,” he said, “so I think that’s fair.”

He said the book was respectable for a tightly priced trade, but noted that it was not as large as for recent deals.