Crédit Agricole added Eu200m to a January 2021 issue this (Wednesday) morning to respond to reverse enquiries driven primarily by short-covering ahead of a potential ECB statement on a new covered bond purchase programme tomorrow (Thursday), amid more positive markets today.

The mood in financial markets was otherwise very reserved, according to a syndicate official, with other taps the only benchmark covered bond supply likely to be launched this week.

Moody’s yesterday (Tuesday) downgraded Italy by three notches, from Aa2 to A2, on negative outlook, but syndicate bankers suggested that such an event had already been priced in. One said that he had not seen any major moves in the BTP curve, nor sellers of obbligazioni bancarie garantite issues, adding that there has been little liquidity in the covered bonds of Italy’s “non-majors” (see separate story for more).

He wondered whether the European Central Bank might have stepped up purchases of Italian government bonds this week.

Natixis analysts said today that the trading in covered bonds has been very thin since the end of last week, with secondary market activity focussing on Dexia Municipal Agency since the beginning of this week. Spreads on obligations foncières issued by Dexia MA have widened by around 20bp across the curve, they said (see separate story for more).

Crédit Agricole’s tap was priced at 110bp over mid-swaps, the middle of guidance of the 110bp over area, which was flat to the secondary market curve on the bid side, according to a syndicate banker at sole lead Crédit Agricole. The increase takes the 3.875% January 2021 obligations de financement à l’habitat issue to Eu2bn.

He said that the bank had identified interest at the end of last week and that this persisted this week, with the issuer – Crédit Agricole Home Loan SFH – deciding to move ahead today because the market was a little bit more supportive, or at least less negative.

“We had a rather small size in mind to accommodate the reverse enquiries, and expected them to be driven by short positions, which has since been confirmed,” he said.

The order books were not due to be kept open for more than 30 minutes, according to the syndicate official.

A syndicate banker away from the lead said that the pricing of the tap was very fair, offering a new issue premium of around 5bp-10bp based on mid levels.

Another syndicate banker away from the leads said that “net-net, getting Eu200m done in this market” was positive, but wondered why the tap was not carried out “under the radar”.

The Crédit Agricole syndicate official said that the tap was made public because the lead wanted to be transparent and show its integrity as a dealer, citing efforts from the International Capital Market Association (ICMA) to improve transparency.

“There is no taboo in only doing Eu200m, and we were happy to respond to reverse enquiries,” he said.