UniCredit Bank AG (HVB) achieved a more than three times subscribed order book today (Wednesday) on a €500m eight year mortgage Pfandbrief that offered 1bp of new issue premium, with issuance set to resume next week after public holidays curtail any supply tomorrow.

Following a mandate announcement yesterday (Tuesday), leads BayernLB, DZ, Lloyds, NatWest and UniCredit opened books this morning with initial guidance of the 3bp over mid-swaps area for the €500m no-grow May 2029 mortgage Pfandbrief, rated Aaa.

After an hour, the leads reported books above €1.1bn, excluding joint lead manager interest, and after a little over an hour and a half, guidance was revised to mid-swaps flat +/-1bp, will price in range, on the back of more than €1.5bn of orders, including €55m JLM interest. The spread was ultimately fixed at minus 1bp on the back of more than €1.8bn of demand, pre-reconciliation, including €55m JLM interest. The final book was above €1.6bn, inclusive of €55m JLM interest.

Syndicate bankers at and away from the leads put fair value for the eight year trade at around 2bp through mid-swaps or marginally tighter – with HVB 2027-2030 outstandings quoted at minus 2.5bp, mid, according to pre-announcement comparables circulated by the leads – implying at least 1bp of new issue premium.

A banker away from the leads described the outcome as “fantastic”, noting that demand had come in quite quickly following initial guidance 5bp wide of fair value.

“It looked very nice from the outside, with a €1.8bn peak order book and minimal new issue concession for a €500m no-grow trade, so very textbook execution,” he said.

Another banker away from the leads said the deal had gone quite well, but highlighted the new issue premium.

“I’m not really surprised they started a bit wider,” he said. “The credit is not as easy as other Pfandbrief issuers and maybe they have a bit more to do this year.”

The euro benchmark is HVB’s third of 2021, bringing its year-to-date issuance to €1.75bn, following issuance in January and March. The spread of minus 1bp for the €500m eight year deal compares with minus 2bp achieved by Berlin Hyp on a €750m 12 year mortgage Pfandbrief yesterday.

A lead syndicate banker said the level and diversity of demand for the transaction and the quality of the order book were at the upper end of recent transactions, and that the overall trade had gone “maybe even a little better than hoped”.

He said the minus 1bp pricing and 1bp new issue premium were appropriate, even if there had been an outside chance of achieving a tighter level.

“From time to time you sense a bit of fatigue among investors when it comes to pricing flat to fair value with a negative yield [-0.023%] and a negative spread,” he said. “This one left something on the table.”

However, another syndicate banker said that HVB’s trade – like Berlin Hyp’s 12 year yesterday that also paid 1bp of new issue premium – did so for idiosyncratic reasons, and that in general issuers should continue to be able to price flat to fair value, as they have typically done in recent weeks.

No further euro benchmark issuance is expected this week, with large parts of Europe enjoying public holidays tomorrow (Thursday) and Friday set to be quiet, but a syndicate banker said a longer dated transaction from an infrequent borrower should emerge after the weekend.

Another said he expects the flow of supply in the past three weeks to continue into next week.

“May is usually quite a busy month,” he added.