MünchenerHyp attracted over €1.8bn of demand to a rare 15 year €500m no-grow mortgage Pfandbrief today (Tuesday), with syndicate bankers attributing the level of oversubscription for the very long dated deal to the positive yield it achieved and the strength of the German issuer.

After announcing the mandate yesterday (Monday) afternoon, this morning leads Crédit Agricole, Deutsche, DZ, Helaba and UniCredit went out with guidance of the mid-swaps plus 11bp area for the 15 year €500m no-grow Hypothekenpfandbrief. After around 45 minutes, books were reported as being over €1bn, including €85m joint lead manager interest, and after around an hour and 15 minutes, the guidance was revised to 8bp+/-1bp, WPIR, on the back of over €1.6bn of demand, including €215m JLM interest. The spread was ultimately fixed at 7bp and the final book at re-offer was over €1.8bn, including €215m JLM interest, including over 70 accounts.

A syndicate banker away from the leads said the strength of the trade was unsurprising following a 10 year green €500m no-grow market reopener from Berlin Hyp a week ago, which amassed over €2.15bn of demand.

“BHH was a pretty good indication that in this rate environment people want to buy covered bonds,” he said.

The strength of MünchenerHyp’s name and the positive yield on offer today – ultimately 0.128% – played in its favour, he added.

“It might sound silly in this world,” he said, “but if you give investors just a little bit more, it becomes a lot easier for them to buy. Where else do you get a positive yield in the SSA or covered space these days?”

The €1.8bn-plus book was particularly impressive for a rare 15 year maturity, syndicate bankers said, with the momentum it gained enabling it to travel relatively swiftly from the outset to the landing at 7bp.

“It’s basically only a couple of Dutch and a handful of German and French names to go that long,” said one, “so it’s a rare one, for sure.”

Bankers said demand for MünchenerHyp’s trade was further fueled by a market that had been starved of supply in the past two months.

“You either take what you can get,” said a lead banker, “or you’re waiting for something that you can’t be sure will appear at all.”

The order book was comprised of the “usual suspects” of investors with very few dropping after the price revision to 8bp+/-1bp, WPIR, he added.

“It was a great success,” he said.”

Syndicate bankers at and away from the leads saw fair value at around 5bp-7bp based on MünchenerHyp’s outstanding curve, representing minimal new issue premium of 0bp-2bp.

“If you compare it to Berlin Hyp doing a 10 year green at plus 6bp last week,” said a second lead banker, “extending the curve by five years and doing a non-green at 7bp is a pretty remarkable outcome.”

A banker away from the leads echoed this.

“If you compare it to BHH last week which printed at 6bp,” he said, “from an RV perspective it’s obviously not that juicy, so a plus €1.8bn book for them is decent.”

Maturities as long as 15 years could become more commonplace, said the second lead banker, for those with access to shorter term ECB funding but with a need for longer duration.

“For these issuers,” she said, “it makes sense to go longer and take advantage of the flatter credit curve.”

However, another banker away from the leads said the 10 year bracket is more likely to remain the sweet spot for the majority of Eurozone issuers.

“Fifteen years is still too long for most issuers in terms of where their average asset base is,” he said, “but if you were one of the other issuers monitoring for a 15 or even 20 year trade, you would be very encouraged by today’s deal.”

Germany took 70.9% of the new issue, Nordics 7.4%, the Benelux 6.3%, Italy 3.6%, the UK 3.3%, Switzerland 2.7%, Austria 2.2%, and other 3.6%. Banks were allocated 37.6%, central banks 23.0%, fund managers 30.4%, and insurers 9.0%.

Sumitomo Mitsui Banking Corporation (SMBC) today held a series of investor calls for a five year euro-denominated benchmark covered bond, which is expected to be launched tomorrow (Wednesday), subject to market conditions.

A syndicate banker said the Japanese bank’s previous issues had met with varied receptions, but that a new issue tomorrow could profit from a supply shortage in more established markets.

“I would not be surprised if this were the case,” he said, “although it remains to be seen.”

Another said the covered bond, which is based on a contractual structure, will not be for everybody.

“It will probably present a spread that will be interesting,” he said, “and if you want to issue something that’s different from the pack, this is definitely the time to do so.”

Goldman Sachs, SMBC Nikko, Barclays, Crédit Agricole and UBS have the mandate.