UniCredit HVB today (Tuesday) generated the biggest final order book of the year for a single tranche euro benchmark, with the NIP and relative value offered by its €750m 10 year deemed central to its success alongside the lack of supply. A 10 year SR-Boligkreditt euro benchmark is expected tomorrow.

After announcing the mandate yesterday (Monday), UniCredit Bank AG (HVB) leads DZ, Helaba, Natixis, NordLB and UniCredit went out with guidance of the mid-swaps plus 5bp area for a 10 year euro benchmark mortgage Pfandbrief. After around 25 minutes, books were reported as being over €1bn, excluding joint lead manager interest, and after around an hour and 15 minutes, the spread was set at 1bp and the issue sized at €750m on the back of over €2.4bn of demand, including €260m JLM interest. The final book good at re-offer was €2.85bn, including €260m JLM interest, while the new issue was priced at a yield of 0.002%.

Bankers attributed the more than three and a half times subscribed book to the prevailing lack of supply – the new issue being only the fourth since the start of last month – as well as an attractive pricing level. Syndicate bankers at and away from the leads put fair value at minus 1bp based on HVB’s curve, implying a new issue premium of some 2bp.

“It was priced to sell as they left a little bit of juice on the table,” said a banker away from the leads. “At plus 1bp, it is very good value for investors.”

A lead banker said the issuer chose to offer the 2bp premium partly to compensate for a compression in spreads, and that driving the pricing 1bp tighter would have alienated some accounts.

“The spread of plus 1bp would also have been on the table two weeks ago,” he added, “but now, with this slight increase in yields and the compression in spreads, it looks like a somewhat juicy new issue premium.”

“This definitely helped the trade, which offers good value given current circumstances and is relatively cheap versus German issuers such as Berlin Hyp and MünchenerHyp.”

The banker away from the leads suggested the deal would also have worked well at mid-swaps flat, but that HVB may have adopted the investor-friendly approach as a frequent issuer with future transactions in mind.

“They’ve sometimes had difficulties,” he said, “but their last couple of trades have been very well-received, so maybe they wanted to keep that positive vibe going.”

HVB tapped the market as recently as mid-January, with a €500m 15 year deal.

Another banker away from the leads said the pricing appeared somewhat generous relative to the last euro benchmark, a NN Bank €500m no-grow 20 year priced at 2bp a week ago.

“I thought HVB would have priced at flat to mid-swaps,” he said, “but to be honest, I’m nitpicking.”

SR-Boligkreditt is expected to launch a 10 year euro benchmark tomorrow (Wednesday), after announcing its plans today. Commerzbank, Citi, Danske, Nordea and NordLB have the mandate.

The new issue will be the third Norwegian euro benchmark this year, following deals from DNB Boligkreditt and Sparebanken Sør Boligkreditt in January. SR-Boligkreditt last approached the euro market in June 2020, with a €750m seven year.