A €750m no-grow long nine year mortgage Pfandbrief for DZ Hyp yesterday (Thursday) was more than twice-subscribed, but a €1bn seven year Crédit Mutuel covered bond achieved little oversubscription, and bankers said the outcomes reflected the differing approaches of the issuers.

After DZ Hyp’s mandate was announced on Wednesday, leads BayernLB, Crédit Agricole, DZ, IMI-Intesa Sanpaolo and UniCredit went out yesterday morning with guidance of the mid-swaps plus 5bp area for the €750m no-grow November 2030 issue, rated Aaa/AAA (Moody’s/S&P). After an hour, they reported books above €1.3bn, excluding joint lead manager interest. After one hour and 50 minutes, the spread was set at 2bp, on the back of books above €1.6bn, pre-reconciliation and excluding JLM interest, and the final order book was above €1.65bn, including €45m of JLM interest, with more than 50 investors participating.

“It’s a strong trade from a strong issuer,” said a banker away from the leads. “For the time of the year and the spread environment, it was a very good deal. They also had quite a big book compared to recent trades.

“Everybody can buy it, and they can command probably a tighter spread than most other issuers.”

Syndicate bankers at the leads said that the transparency gained by capping the size at the outset facilitated the outcome.

“Telling the investors right from the start what they can expect is, in these times, very helpful,” said one.

Syndicate bankers at and away from the leads put fair value for the deal at mid-swaps flat to marginally tighter, implying a new issue premium of around 2bp, which one lead banker said was roughly in line with recent market practice. According to pre-announcement comparables circulated by the leads, DZ Hyp June 2029s were quoted at minus 1.5bp, mid, and March 2030s at minus 1bp.

A syndicate banker away from the leads said that starting at 5bp had helped the trade gain attention.

“They for sure made investors aware that they intended to leave a little bit of NIP,” he added.

Noting that the deal was more than twice oversubscribed, one of the lead bankers attributed the level of demand to the issuer’s “consensual” approach, which he said was well received by investors.

The deal was priced to yield minus 0.036%, whereas it would have achieved a positive yield before a fall in yields this week.

“We had hoped that the market would turn up a positive yield,” said one of the lead bankers, “but with the future like this, there was no chance to get a positive yield. However, investors are familiar with negative yields, so it didn’t really give the trade a bad impression.”

Germany investors were allocated 62%, the Nordics 13%, central Europe 8%, and the UK 6%. Banks took 45%, central banks and public institutions 28%, and funds 27%.

“We are delighted that our third capital market issue in the current year met such strong investor demand, both in Germany and abroad,” said Georg Reutter, chairman of the management board of DZ Hyp. “The high quality order book shows the good reputation DZ Hyp enjoys among investors.”

Yesterday’s trade is DZ Hyp’s third euro benchmark covered bond of 2021 and brings its issuance for the year to €2.75bn.

Crédit Mutuel Home Loan SFH announced its new issue yesterday morning, and leads CIC, Commerzbank, HSBC and UBS went out with guidance of the mid-swaps plus 6bp area for the July 2026 euro benchmark-sized trade, with expected Aaa/AAA/AAA ratings (Moody’s/S&P/Fitch). After two hours and 15 minutes, they reported books in excess of €1.25bn, including €50m of JLM interest. The spread was subsequently set at 3bp, and after four hours and 15 minutes, the size was set at €1bn, with the final book at re-offer €1.15bn, including €50m of JLM interest.

A syndicate banker away from the leads said that the deal was €250m too large, suggesting that a €750m trade would have been a better deal for the French issuer. Syndicate bankers away from the leads put fair value at around 1bp.

“It looked on the expensive side,” said one, “and they were clearly trying to squeeze out every last bit out of it, so I’m not sure how that will perform in secondary.

“We’ve seen trades not necessarily perform,” he added, “and investors are questioning issuers on how much they’re taking out or how much they’re moving price.”

A syndicate banker at one of the leads acknowledged that the market is “less fizzy” than previously. However, he said oversubscription levels will inevitably be lower, but that order books of also of a higher quality. Crédit Mutuel typically issues €1bn-plus trades, he added, and felt the book was strong enough to do so again on this occasion.

He said the level of demand also reflected the drop in yields of around 10bp over the past week. He noted that the new issue premium was in line with recent levels and that Crédit Mutuel had priced its new issue 2bp wider than where CFF priced a longer dated, €1.5bn five year on Monday.