I think it's Sieg's power that turns people into chicks, and the sword by itself only makes people horny.
See chapter 3 where she cut some guys without using his power and it didn't seem like they got genderbent.
and thus end what of the most unique and amazing manga I've read, the ability of the author to make something this good out of what supposed to be shit is something I will remember for the rest of my life. thank you for the translation