Aareal Bank exceeded expectations with a €750m five-and-a-half year mortgage Pfandbrief today (Tuesday), while ABN Amro achieved the same level in three years as Nordea on Friday for double the size. DZ Hyp is set to test the long end tomorrow as part of a dual-trancher.

Following a mandate announcement yesterday, Aareal Bank leads Commerzbank, Crédit Agricole, DekaBank, DZ, NatWest and UniCredit opened books this morning with guidance of the mid-swaps plus 55bp area for a euro benchmark-sized October 2030 mortgage Pfandbrief, expected rating Aaa. After around an hour and 20 minutes, the leads reported books above €2.25bn, excluding joint lead manager interest, and after around two hours and 25 minutes, the spread was set at 49bp and the size at €750m on the back of orders above €2.75bn, including €305m of JLM interest.

“It’s a particular name, as we all know, given their CRE exposure, and we received a lot of ‘no, thank you’ replies yesterday because of this,” said a syndicate banker at one of the leads. “But, as always on transactions like this, the no’s come more quickly to the forefront than the yes’s, who wouldn’t normally show up until you open books, and this was exactly the case here.

“The transaction went very smoothly,” he added, “and the book barely responded to the pricing through the 50bp level, which we had thought could prove to be a bit of a pain barrier for many. So with a €2.6bn book for a €750m deal, this was very successful and, to my understanding, ticked many, if not all of the boxes the issuer was hoping to get ticked.”

He saw the new issue premium as negative – among pre-announcement comparables circulated by the leads, Aareal’s April 2030s were quoted at 49bp and its August 2031s at 53bp.

“It’s fair to argue that fair value for a long five year was rather in the 50s than in the high 40s,” said the lead banker. “It’s not that surprising for a name like Aareal to price inside where the secondaries are optically trading – with the majority of the German universe trading 15bp-20bp tighter, that’s less of a consideration for investors than it might be for a squeezed name like MünchenerHyp.

“So the transaction was in that respect expensive, but it was from the start, and to a significant extent those who weren’t put off by the initial 55bp weren’t put off by the final 49bp, either.”

ABN Amro leads ABN Amro, DZ, Natixis, NordLB and UBS opened books with guidance of the 25bp area for a euro benchmark-sized April 2028 Dutch legislative covered bond, expected ratings Aaa/Aaa (Moody’s/Fitch). After around an hour and 10 minutes, they reported orders above €2.75bn, excluding JLM interest, and after around two hours and 40 minutes, the spread was set at 18bp and the size at €1.5bn on the back of orders above €3.9bn, including €530m of JLM interest. The final book was above €3.75bn.

The Dutch bank’s pricing is flat to where Nordea Mortgage Bank priced a smaller and green €750m no-grow covered bond in the same three year maturity on Friday, with the Finnish issuer also having started at guidance of the 25bp area. That was cited at 16bp, mid, in pre-announcement comparables circulated by ABN Amro’s leads this morning, while Commerzbank February 2028s were at 18bp and ABN Amro August 2027s, issued in August 2023, were at 15bp.

“Double the size and the same spread,” said a syndicate banker at one of ABN Amro’s leads. “It’s a straightforward follow-up to the Nordea, but they didn’t just follow, they painted a bigger picture – they’ve proven on the back of the Nordic trade that there’s still plenty of liquidity in that maturity, but pricing is still up for discussion.

“There are quite a few more traditional bank treasuries not really convinced that this is the best place to be, particularly versus German Länder or agencies like NRW Bank, but for other investors, it’s not that tight compared to other high quality names and what’s available in the triple-A space. So we still had an order book of some €3.75bn.”

DZ Hyp is due next, with a €1bn dual tranche issue comprising 4.4 year green and 9.9 year conventional €500m no-grow mortgage Pfandbriefe. Crédit Agricole, DZ, ING, LBBW, NatWest and UBS are set to launch the deal tomorrow (Wednesday), following a mandate announcement today.

Pre-announcement comparables cited by the leads for the 4.4 year tranche included Berlin Hyp February 2029 and MünchenerHyp August 2029 mortgage Pfandbriefe at 25bp, and LBBW public sector November 2029s at 24bp. Mortgage Pfandbrief references for the 9.9 year included MünchenerHyp March 2035s at 43bp, and LBBW and DZ Hyp February 2034s at 41bp.

“An interesting element tomorrow will be to test the long end,” said a syndicate banker at one of the mandated leads. “We’ve seen 10 years before, but not that often.

“I’m convinced the long end is open, but the price dynamics, investor participation and such remain to be seen.”

Yesterday (Monday), Crédit Agricole Home Loan SFH had the covered bond market to itself for a 7.25 year euro benchmark.

Leads Commerzbank, Crédit Agricole (global coordinator), NordLB, RBI and Scotiabank opened books with guidance of the mid-swaps plus 61bp area for a euro benchmark-sized July 2032 green covered bond, expected ratings Aaa/AAA/AAA (Moody’s/S&P/Fitch). After around an hour and three-quarters, they reported books above €2bn, excluding joint lead manager interest, and after close to two hours, the spread was set at 53bp on the back of orders above €3.7bn, and the size was subsequently set at €1.25bn with the book above €3.5bn, pre-reconciliation and excluding JLM interest. The final book good at re-offer was confirmed at more than €3.5bn, excluding JLM interest.

“Despite the risk-off tone, investors were highly engaged in the process, with several triple-digit real money orders at the top of the book,” said a banker at one of the leads. “The long seven year tenor was chosen to differentiate from the six year issued earlier in the year and also to avoid credit curve steepness to 10 year.

“The opportunity for accounts to pick-up rare triple-A rated secured paper at 3% helped the overall pricing dynamics, with zero NIP and very limited book attrition through the last pricing iteration. Remarkable was that the transaction priced 5bp inside the interpolated OAT curve.”

Crédit Agricole Home Loan SFH February 2031s, issued on 6 February at 48bp, were quoted at 42.5bp in pre-announcement comparables circulated by the leads, while CRH February 2032s, re-offered at 56bp on 10 February, were seen at 51bp.

Banks and private banks were allocated 42%, asset managers 24%, central banks and official institutions 22%, insurance companies and pension funds 10%, and others 2%. Germany, Austria and Switzerland took 45%, the Benelux 17%, France 15%, southern Europe 11%, the Nordics 7%, the UK and Ireland 4%, and eastern Europe 1%.