MünchenerHyp is set to launch the longest-dated euro benchmark since May tomorrow (Tuesday), a €500m 20 year, which will be the fifth German benchmark in two weeks. Market participants are meanwhile divided as to whether supply will reach €100bn by year-end.

The Bavarian lender has mandated Commerzbank, DekaBank, DZ, NatWest and NordLB for the €500m no-grow 20 year mortgage Pfandbrief, which is expected to be launched tomorrow, subject to market conditions, after its announcement this afternoon.

Münchener Hypothekenbank’s last euro benchmark – and its only other this year – was also at the long end of the curve, a €500m 15 year on 1 September. It previously sold a 20 year benchmark, a €500m April 2039, in April 2019.

The new 20 year bond will be the longest-dated euro benchmark in almost five months, following a Axa Bank Europe SCF €500m no-grow 20 year on 28 May.

The new issue comes after two weeks in which Germany has dominated euro benchmark covered bond issuance, with only a Compagnie de Financement Foncier €500m 15 year on Monday of last week (19 October) interrupting a series of four Pfandbriefe. Wüstenrot Bausparkasse and Bausparkasse Schwäbisch Hall tapped the market with inaugural benchmark trades on 13 October and 15 October, respectively, and last week Aareal and DZ issued on Wednesday and Thursday.

A banker at one of MünchenerHyp’s leads said he has little doubt the transaction will succeed in achieving the issuer’s targets.

“It’s one of those opportunities where more or less everything works automatically,” he said, “so why not make use of it?”

He said MünchenerHyp’s recent September 2035s were quoted at around 1.5bp over mid-swaps, and its April 2039s at around 3.5bp.

No further mandates are in the pipeline, according to syndicate bankers. One said supply will remain patchy and opportunistic for the foreseeable future, as blackout periods continue this week for some areas.

“I would not take November off the table yet,” he added.

Year-to-date euro benchmark supply excluding taps stands at around €87bn, and the syndicate banker said it is more than likely that year-end supply will reach at least €100bn.

“Can we get €13bn in that time? I think definitely,” he said.

Another syndicate banker was more sceptical, noting that the majority of issues this year have been for around €500m, and that many of the names that issue in size have already been.

“This means that we’d have to see something like 26 trades at €500m,” he said, “which is probably the number of trading days left until Christmas! So I doubt it – it’s probably a bit of a stretch.”

An analyst told The CBR that he expects 2020 euro benchmark supply to reach €100bn at the very most, given the infrequency of new issues, and the broader reduced funding needs of issuers.

“For the last two or three weeks, we’ve had an average of around three new issues per week,” he said. “This may continue for a while, but we don’t see there being too much supply for the rest of the year.”

Another analyst was more optimistic that the €100bn mark would be topped, anticipating €12bn-€15bn of euro benchmark supply between now and year-end.

“I’m quite confident,” he said. “If we continue at a €2bn a week pace, then we will get there in the end.”

He suggested that the remainder of 2020’s supply will come from a mixture of issuers who prefer long-dated issuance, those who do not have the same level of recourse to central bank refinancing facilities, and opportunistic and unpredictable pre-funding trades.

“For example,” he said, “I did not expect CFF to do something in the middle of October, but I suppose doing very long end funding just before the European Union made sense to them. Neither did I expect Aareal to be doing anything.”

Last week’s inaugural EU issuance under its SURE funding programme did not have a material impact on the covered bond segment, said another syndicate banker, despite several market participants having previously expressed concern that it would cause spreads to widen.

“They are different worlds and different leagues,” he said, “and I think things will continue this way.”