Berlin Hyp opted for the short end for its latest green Pfandbrief and was rewarded with a peak book of some €4bn and final €3.2bn book for the €500m no-grow long three year, allowing it to price with a negligible new issue premium as its offering proved hard to pass on, according to a lead banker.

Following a mandate announcement yesterday (Tuesday), leads Barclays, Commerzbank, Crédit Agricole, LBBW and Nordea this morning opened books with guidance of the mid-swaps plus 21bp area for the €500m no-grow May 2027 green mortgage Pfandbrief, expected rating Aaa. After around 50 minutes, they reported books above €1.5bn, excluding joint lead manager interest, and after around an hour and 40 minutes, they revised guidance to plus 15bp+/-1bp, will price in range, on the back of books above €3.1bn, including €320m of JLM interest. The pricing was then set at 14bp on the back of more than €4bn of demand, and including €320m of JLM interest and pre-reconciliation, and the final book good at re-offer was €3.2bn, including the JLM interest.

A syndicate banker at one of the leads put the new issue premium at zero, or arguably 1bp. According to pre-announcement comparables circulated by the leads, Berlin Hyp 0.01% July 2027 green Pfandbriefe and its 3% October 2027s were both trading at 15bp, mid, parent LBBW’s 3.25% September 2027 green Pfandbriefe at 13bp, and other BayernLB, LBBW and MünchenerHyp conventional Pfandbriefe in the 2027 maturity bracket at 13bp-14bp.

“This had all the ingredients to be a blow-out from the start,” said the lead banker. “You had the green label that boosts demand, the short end that a lot of people can buy, and then from the outset it was kept at €500m.

“All that combined with a very attractive starting point meant that this was a trade that was bound to be a blow-out from the beginning.”

He noted that a €1.25bn three year Société Générale SFH deal priced at 20bp on Tuesday of last week (23 January) was quoted at 18bp, mid, and said that Berlin Hyp’s initial guidance of 21bp was clearly attractive for the better credit – even if such tighter names are not for everyone.

“For those investors that could look at this kind of spread and at the short end of the curve, this was really something they just could not pass on.”

German bank treasuries headed demand, according to the lead banker.

“There’s also been an oversupply in everything five years and longer over the last month, and particularly seven and 10 years,” he added, “so bringing a three year maturity to the market offers some scarcity value, which investors really welcomed.”

Other German names to have tapped the short end this year have been those trading at much wider spreads – Aareal, Deutsche Pfandbriefbank and Hamburg Commercial Bank – and Commerzbank, which issued a €1bn three year on the first business day of the year (2 January) at 23bp.

An analyst noted that some 66% of Berlin Hyp’s cover pool is composed of commercial real estate and that “this is not without consequence” in the current economic environment.

“The exposure to CRE is obviously public,” said the lead banker, “and investors will individually assess the risks for each name. But when you see the final book, I don’t think that was really an issue here.”