ING-DiBa sold the biggest green Pfandbrief yet today (Thursday), a €1.25bn seven year with the financing of energy efficient buildings as the use-of-proceeds, and also achieved pricing flat to fair value and the tightest spread on a euro benchmark since April.

The mandate for the seven year green covered bond debut was announced on Tuesday and this morning, leads Commerzbank, Danske, Helaba, ING, LBBW and Natixis went out with initial guidance of the 2bp over mid-swaps area for the October 2028 benchmark mortgage Pfandbrief, rated Aaa. After an hour, the leads reported books above €1.5bn, excluding joint lead manager interest, and after two and a quarter hours, they revised guidance to minus 2bp+/-1bp, will price in range, on the back of books above €2bn. The spread was ultimately set at minus 3bp on the back of books above €2bn, excluding joint lead manager interest, pre-reconciliation, and the final order book good at re-offer was unchanged.

Syndicate bankers cited the green character of the bond, the seven year maturity and the underlying strength of the market as factors in the deal’s success.

“A move of 5bp is not everyday business for a German covered bond,” said one. “There’s hardly a box they didn’t tick with this one.”

The pricing is the tightest on a euro benchmark covered bond since a €500m 15 year for MünchenerHyp was sold at the same minus 3bp level on 27 April, and ING-DiBa was at the same time able to price the largest green Pfandbrief yet, at €1.25bn.

A syndicate banker at one of the leads put the greenium achieved by the deal at around 1bp. According to pre-announcement comparables circulated by the leads, ING-DiBa May 2027s were quoted at minus 3bp, mid, and its October 2033s at minus 2.5bp. Berlin Hyp green January and July 2028s were both seen at minus 4bp, while DZ Hyp and Helaba non-green 2028 paper was at minus 3bp.

“We got a few big green accounts with decent allocations,” said the lead banker.

He said the rate environment, with yields having backed up over the past week or so, clearly helped – the new issue was priced at a yield of minus 0.074%.

“Even if we have seen quite a few long dated deals,” he added, “the deep pockets are still in the five to seven year part of the curve.

“And accounts are happy to see fresh supply.”

ING-DiBa’s green bond is issued under the Dutch parent group’s framework, supplemented by a methodology detailed by consultant Drees & Sommer for German residential green buildings. The identified green portfolio is some €2.89bn and includes 20,637 buildings.

The German issuer joins ING Bank Hipoteczny in having issued green covered bonds, while the Dutch group has also issued in formats including HoldCo senior and Tier 2.

ING-DiBa’s green Pfandbrief is the third green covered bond debut from a German issuer this month, following a €500m five year debuts from NordLB and UniCredit HVB on 15 and 20 September, respectively.