A Eu500m five year no-grow Pfandbrief announced by Deutsche Hypo today (Friday) is expected to be launched on Monday, and while bankers are anticipating solid domestic demand, expectations differed as to whether pricing through mid-swaps could be achieved.

Deutsche Hypothekenbank appointed Deka, DZ Bank, HSBC, NordLB and UniCredit to lead manage the Eu500m Hypothekenpfandbrief and a syndicate official at one of the leads said that the deal is expected to be Monday’s business.

A syndicate official away from the leads noted that a Eu500m no-grow seven year covered bond issued by Deutsche Genossenschafts-Hypothekenbank (DG Hyp) on Monday was priced flat to mid-swaps. That was the tightest priced seven year benchmark covered bond of the year and attracted an order book of Eu1.6bn.

“DG Hyp and Deutsche Hypo are of similar quality, and the two deals are fairly similar,” he said. “So, with this being a shorter maturity, and with Deutsche Hypo October 2019s at 5bp through, I could see this new transaction coming through mid-swaps.”

The deal will be the first new euro benchmark covered bond from the issuer since June 2013, when it priced a Eu500m seven year at 3bp over mid-swaps. This 2020 bond is trading at 1bp over, according to the lead banker. He added that this would be one of two outstanding Deutsche Hypo Pfandbriefe that the leads would be using as comparables, the other being the aforementioned October 2019, priced in September 2012 at 4bp over and trading at 5bp through mid-swaps.

He was more modest in his expectations regarding pricing.

“The target for this transaction will be to price in the low single-digits, and maybe even get it flat to mid-swaps,” he said. “However, I do not think we will be able to get it through mid-swaps.

“DG Hyp may have printed a seven year at flat, but a shorter maturity does not directly lead to tighter pricing.”

He added that he expects high German participation in the deal, which, alongside an impending euro legislative covered bond debut from Canada’s Toronto-Dominion Bank (TD), is expected to be one of only two new covered bond deals next week.

“The market is still in such good shape, and I expect this deal to go well,” he said. “Aside from the expected TD deal, there is little else out there in terms of covered bonds, with the summer granting some sort of exclusivity for issuers.”