Deutsche Pfandbriefbank achieved “the perfect trade” with a €500m no-grow five year Pfandbrief on Wednesday, pbb’s Götz Michl told The CBR, as it attracted almost €1.8bn of orders at close to no NIP, vindicating a decision to accelerate plans for its first euro benchmark since January 2020.

The German lender’s last euro benchmark was a €750m eight year at the beginning of last year. Since then it has restricted its public covered bond issuance to foreign currencies – including two £500m (€585m) three year Sonia-linked trades and a $750m (€642m) three year benchmark – while also participating in the TLTROs partly as an alternative to market-based Pfandbrief issuance.

Michl (pictured), head of funding and debt investor relations at Deutsche Pfandbriefbank (pbb), said the issuer had planned to return to the euro market by year-end and had envisaged issuing in September or October, but decided to proceed this week after Berlin Hyp sold a €500m five year post-summer reopener on Tuesday that attracted some €2.1bn of orders and paid just 1bp of new issue premium.

“We saw the Berlin Hyp trade, of course,” said Michl. “We hadn’t expected it to come mid-August, which would normally be a bit early for the market opening, but we saw how well it went, so we made the decision to issue rather quickly.

“Why wait if the market is there? It is probably better to be in the market now rather than when it is more crowded in September.”

After guidance of the mid-swaps plus 4bp area for the €500m no-grow August 2026 trade attracted close to €2bn of orders, leads BayernLB, Commerzbank, Erste, Helaba and UBS priced the mortgage Pfandbrief at mid-swaps flat, with almost €1.8bn of demand good at re-offer, according to Michl. Syndicate bankers saw this flat to around 0.5bp over fair value.

“We managed to be very tight, with basically no new issue premium and very close to Berlin Hyp,” added Michl, noting that its mortgage Pfandbriefe are rated Aa1 and its peer’s Aaa.

“It was the perfect trade for us.”

Pbb had been considering either a five or a seven year trade, and he said the success of Berlin Hyp’s deal offered a clear template for it to follow in the five year maturity.

As well as offering an attractive rate of minus 1%, Michl noted that the TLTROs had allowed for better asset-liability matching when negative yields were pushing benchmark issuance into longer maturities, and he welcomed the opportunity to issue in a shorter maturity.

On the back of the new issue, pbb yesterday (Thursday) tapped a €500m August 2027 issue for €50m.

Michl said pbb does not plan to sell another euro benchmark this year.

“We always look at foreign currencies, but that needs to be attractive,” he added, “and since we have already done dollars and sterling this year, it would really need to be especially attractive for us to go for what would effectively be pre-funding for next year.”