BayernLB today (Monday) equalled the tightest spread on a euro benchmark this year, with a €500m eight year public sector Pfandbrief priced inside fair value. Hamburg Commercial Bank (HCOB) is meanwhile expected shortly with its first euro benchmark since being renamed from HSH Nordbank.

After a mandate announcement on Friday, BayernLB leads BayernLB, Commerzbank, ING, Natixis and UniCredit opened books this morning with initial guidance of the mid-swaps plus 1bp area for the €500m no-grow November 2029 public sector Pfandbrief, expected rating Aaa. After 50 minutes, they reported books above €1bn, excluding joint lead manager interest. After an hour and 50 minutes, they revised guidance to minus 3bp+/-1bp, will price in range, on the back of books above €1.5bn, excluding JLM interest. The spread was ultimately fixed at minus 4bp with books above €900m, pre-reconciliation and excluding JLM interest, and €935m of orders were good at re-offer.

A syndicate banker away from the leads highlighted that the pricing was inside that achieved on a €1bn five year from DZ Hyp on Tuesday, which was priced at minus 3bp, citing BayernLB’s smaller size as a factor in the outcome.

“It was an impressive trade,” he said. “By squeezing it tight, they lost about €600m of interest, and given that the ECB order stays, obviously a lot of investors thought they are going too tight at minus 4bp.

“Nevertheless, with a €900m-plus book at re-offer, that is perfectly fine.”

The spread is the equal tightest for a euro benchmark since BayernLB’s last, a €500m 10 year in April.

“We managed to tighten the spread 5bp through the marketing period,” said a syndicate banker at one of the leads, “and given that there’s been quite a lot of supply, that’s a really great success.”

The result was partly down to hitting the “sweet spot” in terms of maturity, according to the lead banker.

“This year had a lot of 10 year transactions, but some investors are still aiming to fill the different maturity brackets,” he said, “and the slight increase in interest rates leading to the fact that we were able to show a re-offer yield in positive territory, which is very important for savings banks, cooperative banks, small funds, and so on.

“They really appreciated the possibility to invest in positive yields.”

The eight year issue was priced at a yield of 0.141%.

Bankers at and away from the leads put fair value for the deal between minus 3.5bp and 3bp, implying pricing up to 1bp through BayernLB’s curve. According to pre-announcement comparables circulated on Friday, its January 2028s and February 2029s were trading at minus 3bp, and its April 2031s at minus 4bp.

“Historically, it is always a very tight name,” said another banker away from the leads. “It’s of very sound quality and you do have lines available for this kind of name, so everyone can buy and it doesn’t come very often in the market.”

Hamburg Commercial Bank AG (formerly HSH Nordbank) is planning a seven year euro benchmark mortgage Pfandbrief with expected rating Aa1 by Moody’s, according to a mandate announcement today. ABN Amro, Commerzbank, LBBW, Societe Generale and UniCredit are leads.

The issuer last approached the market under in its previous HSH Nordbank guise over three years ago, in October 2018, with a €500m three-and-a-half year mortgage Pfandbrief. Its mortgage Pfandbriefe were upgraded to Aa1 from Aa2 in July, on the back of an upgrade of the issuer to Baa1 from Baa2.

A lead banker said the deal is expected to be launched tomorrow (Tuesday) or Wednesday, after investor calls were scheduled today.

He put fair value in the context of flat to plus 1bp, noting that the Aa1 rating is the same as that Deutsche Pfandbriefbank (pbb) – among pre-announcement comparables circulated by the leads, pbb August 2026s were seen at minus 2bp, mid.

“They are about 2bp back of the top rated names in Germany,” said the lead banker, “and on the other hand they are quite an established issuer, so they have lines established for them. So I would say they ought to pay a couple of basis points concession, given that they haven’t been present in the market, they need to establish a curve, and therefore there will be some pick-up needed.

“Whether it’s 1bp or 2bp, we will find out during bookbuilding.”

The two Pfandbriefe maintain the steady pace of supply this month, after six euro benchmarks contributed €4.3bn of supply last week. According to Joost Beaumont, senior fixed income strategist at ABN Amro, that took supply for October to €11.6bn, the highest amount for the month since 2015, with year-to-date euro benchmark supply now around €85bn.