Caisse de Refinancement de l’Habitat added Eu850m to a January 2022 bond at 150bp over mid-swaps yesterday (Wednesday), leading to an adjustment of the CRH curve, but the issuer focused on the achievement of having brought a deal to market.

Leads Barclays Capital, BNP Paribas, Crédit Agricole, Natixis and Société Générale built a book of Eu900m and priced the transaction in line with initial guidance of the 150bp area.

RBS analysts said the deal had a high new issue premium of about 30bp that had triggered a harsh adjustment of the CRH curve. It expected other issuers would also be required to pay high new issue premiums if they want to come to the market, and that the impact would be the same on their outstanding bonds.

“Turnover in the secondary market has been subdued for the last few months and increased activity in the primary market could give guidance to the market and should lead to a new equilibrium of spreads over time,” said the analysts.

Henry Raymond, chairman and chief executive offer at CRH, said the spread was about 25bp wider than CRH’s last transaction, but added that the deal had proved it was possible come to market.

“I think it’s good for the market,” he told The Covered Bond Report. “A market without a deal is awful for everybody – it’s even awful from a technical point of view because it makes it impossible to have a technical value of the assets.

“I think this deal was good for CRH borrowers as well as the market, and the wider European economy. For the time being I have changed my mind about having to come to the market with the exact right price – just doing a deal is an achievement.”

A syndicate official at one of the leads said CRH had paid a new issue premium of 15bp-20bp compared with a CRH January 2021 issue that had been trading at 130bp over on the offer side on Tuesday.

“The clients have not been buying CRH in the secondary in the last few days because the premium did not compensate them enough,” he said, adding that the higher new issue premium was part of the reason the transaction had gone well.

“The other reason it was attractive to investors was that we were able to offer a 4.29% yield,” he said.

Raymond at CRH said the issuer had decided to come to the market because the general market backdrop had improved slightly, and because of the covered bond purchase programme as well as the possibility of other reforms coming. At the same time, he said he could have done the deal without the ECB.

The lead syndicate official said the purchase programme gave the transaction some comfort in terms of execution.

“It was quite a good comfort because we knew we would have a minimum size for the tap,” he said. “Central banks bought 29%, and that number includes the programme and other central banks outside of the euro-zone.”

Insurance companies took 56%, fund managers 10%, and banks 5%.

A syndicate official away from the leads said that with a 66% participation rate from insurance companies, pension funds, and asset managers, there was an indication that the real money bid for yields above 4% is still intact. He added that it seemed that fears that French banks could not fund themselves in the public markets were a bit overblown.

The lead syndicate official said that good demand from French accounts, which were allocated 53% of the tap, had been expected.

“We also had good demand from Germany (19%) that we were surprised about given the recent negativity around France,” he added.

Nordic investors bought 10%, southern Europe 8%, Switzerland 7%, the UK 2%, and the Benelux 1%.

Raymond at CRH said the issuer chose a 10 year maturity because it was looking for long term funding.

“I was told investors are cash rich and need to invest in longer maturities,” he added.