UniCredit HVB attracted €2bn of orders to a €1bn eight year deal today (Tuesday) at a level noticeably wider than the past three German Pfandbrief issues, but syndicate bankers said it was still a solid result demonstrating demand for the asset class is not tapering off.

After announcing the mandate yesterday (Monday), UniCredit Bank AG (HVB) leads BBVA, Commerzbank, Natixis, NordLB and HVB this morning went out with guidance of the mid-swaps plus 10bp area for an eight year euro benchmark-sized mortgage Pfandbrief. The deal was ultimately priced at plus 7bp and sized at €1bn, on the back of over €1.4bn of demand. The final book was €2bn.

A syndicate banker away from the leads said the twice-subscribed book represented a positive result for the issuer, even if the spread at plus 7bp was 1bp wider than where Berlin Hyp priced a longer, €500m 10 year green Pfandbrief two weeks ago, at 6bp.

“It’s not been the easiest of names in the last few years given its ownership by the Italian group,” he said, “so it’s really good to see that, in a low yield environment, it can get a plus €2bn book.”

Berlin Hyp’s green 10 year is now at 3bp in the secondary market, he noted, but said HVB typically trades 2bp-4bp behind best-in-class Pfandbrief issuers.

“It is what is it is,” he added, “and if you accept that this is where investors find interest, this is exactly what they printed today, so I think it’s a good deal, especially when you consider the demand.”

He saw fair value at around 6bp, based on HVB June 2030 paper at 7.5bp, implying 1bp of new issue premium.

“Its five year paper is also at plus 5bp,” he added, “and most Pfandbrief curves have 1bp between five and seven years, here we have two, so I’d say it was 1bp of NIP – others may say it was flat or 2bp.”

Another away from the leads saw fair value at around 5bp-6bp and said the guidance at 10bp seemed generous versus where the past three Pfandbrief issues from Berlin Hyp, MünchenerHyp and DZ Hyp were trading.

“HVB so far have taken a fairly pragmatic approach and paid what is required to get a fairly decent trade done,” he said, “so while this is not the one that goes to the books for being the tightest or lowest yielding, it’s another solid appearance.”

The book size is encouraging when compared to that achieved by German names before the summer, he added, with demand for the asset class showing few signs of waning since Berlin Hyp reopened the market on 25 August.

“I can’t see the overall weaker market sentiment we are experiencing impacting covered bonds,” he said.”

Despite market fundamentals backing the segment appearing solid, issuers still have to be careful with final pricing revisions, according to the syndicate banker, as some recent issues have experienced a degree of pushback from investors.

“Some real money investors are not buying at any price,” he said, “so this is something to keep in mind.”

With a European Central Bank meeting on Thursday, little activity is expected for the rest of the week, but one syndicate banker said two to three names have been eyeing the primary market.

“We had them down for this week,” he said, “but with this ECB conference – which in previous years seen little issuance around it – I’d say they’ll come next week.”