A peak €750m book for a €500m no-grow seven year Berlin Hyp mortgage Pfandbrief today (Monday) reflected the limits of demand for issuance at negative yields and tight spreads, according to syndicate bankers, although Deutsche Hypo is set to follow with a similar trade tomorrow.

After announcing Berlin Hyp’s mandate this morning, leads Commerzbank, Crédit Agricole, DekaBank, HSBC and UniCredit went out with guidance of the mid-swaps plus 1bp area for the €500m no-grow seven year mortgage Pfandbrief. After around two hours, guidance was revised to minus 1bp+/-1bp, WPIR, on the back of over €750m of demand, excluding joint lead manager interest, and the spread was ultimately set at minus 1bp on the back of over €700m orders, excluding JLM interest.

A syndicate banker away from the leads said that the deal was “a pretty decent outcome”, particularly given the minus 0.201% yield on offer.

“They’re well experienced in deeply negative yielding territory,” he added.

Berlin Hyp issued the first negative-yielding euro benchmark covered bond, in March 2016, and has overall been the most active in issuing such benchmarks.

However, a syndicate banker away from the leads said the deal’s bookbuilding appeared “a bit sluggish”, noting the issuer was not able to hit the minus 2bp level that had been left open as an option by the revised guidance.

“It was not the most exciting of transactions,” he said, “but in the end, it was OK.”

He saw fair value at around minus 2bp, but noted that a five year Helaba Pfandbrief was priced at minus 1bp on 15 January and a DZ Hyp four year at minus 2bp on 30 January.

“You wouldn’t expect it to come tighter than either of the two,” he said, “as it’s more or less in the same league, so it doesn’t leave a lot of room for manoeuvre.”

“The German market is squeezed at the moment,” he added, “to the extent it doesn’t leave a lot of space for a truly exciting or surprising transaction.”

A syndicate banker at one of the leads said the deal went well, with a book that peaked at over €750m and the minus 1bp print more than satisfactory for the issuer in light of the negative yield.

“This issuer tends not to tighten too much,” he said, “as they don’t want to be known as the one who squeezes the market to the last basis point, which they could’ve done here.”

He said the issuer did not need to target a book larger than €750m for the €500m no-grow trade, and that there was minimal price sensitivity, although from a relative value perspective versus domestic SSAs, it was not particularly attractive for some investors.

“Some were saying that at this price they would rather take an SSA rather than a covered bond,” he said, “and this is feedback we have gotten a few times now.”

He put the new issue premium at 1bp-2bp.

“All things considered,” he said, “there are worse things out there.”

Deutsche Hypo is set to follow its compatriot into the seven year part of the German market tomorrow (Tuesday) with its own €500m no-grow mortgage Pfandbrief, after the deal was announced in the wake of Berlin Hyp’s pricing.

A syndicate banker at one of leads DZ, HSBC, Natixis, NordLB and UniCredit said he was not aware of any competing deals due tomorrow.

“If anything comes, it will come from very different angles,” he said.

“There will be supply here and there this week,” he added. “The market is a little bit fatigued, though this is no reason to be concerned.”

Another syndicate banker said he expected Deutsche Hypo to market its Aa1 deal at least 2bp wider than Berlin Hyp’s Aaa January 2027 paper.

According to pre-announcement comparables circulated by the leads, Deutsche Hypo May 2026s were at mid-swaps flat, mid.

He said another German issuer is eyeing issuance this week.

“After seeing the announcement from Deutsche Hypo,” he said, “they will likely be patient and wait for another slot in the week.”