DZ Hyp generated its biggest Pfandbrief book of the year today (Thursday), as a €1bn eight year mortgage Pfandbrief attracted over €2.5bn of demand to be priced flat to fair value, a level bankers said reflected the issuer’s regular visits to the market, with the latest being its fourth appearance of 2020.

After announcing the mandate yesterday (Wednesday), leads Barclays, BayernLB, Danske, DZ, ING and UniCredit this morning went out with guidance of the mid-swaps plus 6bp area for a euro benchmark-sized eight year mortgage Pfandbrief. After around 45 minutes, books were reported as being over €1bn, excluding JLM interest, and after around an hour and 10 minutes, guidance was revised to 3bp+/-1bp, WPIR, and the issue sized at €1bn on the back of over €2bn of demand, including €135m JLM interest. The new issue was ultimately priced at 2bp, on the back of over €2.5bn of demand, including €135m JLM interest.

Today’s euro benchmark is DZ Hyp’s fourth this year and the order book is its biggest yet in 2020 – the other deals were sized at €750m-€1bn.

“They had an over two times covered book with no new issue premium, and they’ve come to the market a lot,” said a syndicate banker away from the leads. “It’s a respectable trade.”

Syndicate bankers at and away from the leads put fair value for the new issue at 2bp based on DZ Hyp’s outstandings.

A lead banker said the issuer could have been more aggressive in its pricing strategy and landed 1bp tighter, but wanted to ensure that it could print €1bn at a good price and therefore exercised a degree of caution.

“They were conscious it was going to be a €1bn trade; it wasn’t about getting as tight as possible and then doing €750m,” he said. “So they were prudent.”

The strategy of moving 4bp and landing at fair value reflected a consideration of both investor and issuer interests, he added.

However, a syndicate banker away from the leads suggested the execution strategy may have been overly defensive, as he expected it could have landed at least 1bp tighter.

“With a different strategy, it could have been plus 1bp or flat,” he said, “so they perhaps could have been more in touch with how strong the market is.”

He acknowledged the issuer had chosen to leave some basis points on the table, as reflected by the €2.5bn-plus book, but said the magnitude of orders was “not normal” for an eight year Pfandbrief.

But another banker away from the leads said that given the frequency of DZ Hyp’s issuance, it was not advisable for them to push for a tighter price.

“They take some €5bn out of the market every year,” he said, “so you can’t squeeze the hell out of every deal, you have to be respectful for the volumes you issue. You can always do a deal 1bp tighter, but at what cost?”

A banker said that, along with a €500m short six year deal from Aareal launched yesterday (Wednesday), the new issuance demonstrates the market to be in remarkable shape, having achieved minimal to negative new issue premiums and substantial orderbooks.

“They’re both beauties,” he said.