Long end problems mounted today (Wednesday) as RBI pulled a €250m 15 year tranche it had hoped to launch alongside a €500m six year, leading bankers to question the viability of further issuance beyond 10 years, while MünchenerHyp achieved a modest outcome on a €750m seven year.

Following a mandate announcement yesterday (Tuesday), Raiffeisen Bank International (RBI) leads Barclays, BNP Paribas, Commerzbank, ING, Mediobanca and RBI opened books this morning with initial guidance of the mid-swaps plus 5bp area for the €500m no-grow six year tranche, and the mid-swaps plus 15bp area for the planned €250m 15 year tranche, both expected rating Aa1. After two hours and 15 minutes, they reported combined books over €1bn, including €75m in JLM interest, skewed to the six year. After three hours and 20 minutes, the spread for the six year tranche was set at plus 2bp on the back of books over €850m, including €75m in JLMs. The leads said the issuer had chosen not to proceed with the 15 year tranche for the day and thanked investors for their interest.

Syndicate bankers said the failure of the 15 year demonstrated the extent to which conditions at the long end have deteriorated.

Just over two weeks ago, Erste Group Bank was able to attract some €1.5bn of orders to a €750m 15 year part of a dual-tranche transaction and tighten pricing 4bp to a re-offer of 5bp – 10bp inside RBI’s opening level in the same tenor for its planned sub-benchmark today.

“I presume that postponing or stepping back from this exercise was definitely prudent,” said a banker away from the leads. “Maybe if they do the exercise two weeks from now, it will all be bright and sunny again, but as of today, they had to pull out.”

At least one syndicate banker had already suggested yesterday that the market might be as good as closed for 15 to 20 year issuance, after ABN Amro on Monday attracted only around €1.15bn of demand to a €1bn 15 year despite paying a new issue premium of as much as 5bp, while a Crédit Agricole €1bn 11 yesterday achieved a modest outcome.

“You have seen all longer dated trades having thin books,” said another syndicate banker today. “It kind of started earlier, but to me, the ABN Amro 15 year was a little bit of a game-changer.

“They had to pay up quite a significant NIP to get it done, and the book was considerably smaller than what they are used to for issuing in the long end. So it’s a signal that there’s a weakness in the long end.”

He acknowledged that trying to do a 15 year by keeping it small was a sensible strategy, and another banker away from the leads said he had assumed the longer tranche was perhaps based on reverse enquiries, given that some investors still need to buy longer dated assets.

Bankers also the noted the lack of traction RBI achieved on the shorter tranche, which made it one of the least subscribed euro benchmarks of the year.

Münchener Hypothekenbank (MünchenerHyp) entered the market this morning after a mandate announcement yesterday, with leads Barclays, DekaBank, DZ, LBBW, Santander and UniCredit going out with initial price thoughts of the mid-swaps flat area for a €750m no-grow February 2029 mortgage Pfandbrief, expected rating Aaa. After one and a half hours, they reported books above €1bn, excluding JLM interest. After two hours and 10 minutes, guidance was revised to minus 3bp+/-1bp, will price in range, on the back of demand over €1.15bn, including €45m in JLM interest. The spread was ultimately set at minus 3bp, on the back of demand over €1.1bn, JLM interest unchanged.

“It went OK, no more, no less,” said a lead banker. “We know it’s becoming a little more challenging than it used to be, but in any case, we brought it decently over the finish line.”

He said the pricing of minus 3bp offered a good balance between demand and the issuer’s ambitions, even if they had hoped to achieve a tighter level.

MünchenerHyp’s pricing was 2bp wider than where LBBW priced a €750m no-grow long seven year mortgage Pfandbrief on the Monday, and bankers away from the leads highlighted the differential between the two German names.

“At least they wanted to test if there’s a possibility of pushing it to minus 4bp,” noted one, “which would then be more in line with some of the tighter names, like LBBW, DZ, Helaba. But there is resistance now.

“The air seems to be a little bit thin when it comes to the really tight issuers. It’s clear that not everybody is chasing those bonds. But at the end of the day, a fine respectable trade for the market that we are in right now.”