A long BPCE tap constituted the only activity in the primary benchmark market this (Thursday) morning, with an absence of new issues attributed to central bank meetings today. Meanwhile, SNS said that given its funding position a covered bond might not make sense on the terms available.

Barclays Capital, Natixis, NordLB and UBS are lead managing the March 2022 BPCE tap and set guidance at the 175bp over mid-swaps area. A syndicate official on the transaction said that the aim is to increase the Eu400m issue to benchmark size, and that the tap had gotten off to a good start.

A syndicate banker away from the leads said that the original issue appeared to be a private placement and that the pricing looked fair.

BPCE will be adding to Eu7bn of long dated French supply that has been priced since markets opened in 2012. The 175bp over area matches the guidance that was set for a Eu1.25bn 12 year issue for Crédit Mutuel-CIC Home Loan SFH, which was the last French issuer to launch a new benchmark. Compagnie de Financement Foncier, which is part of the BPCE group, came before CM-CIC with a Eu1bn 10 year deal at 190bp over.

Market participants said that there are no new issues in the market mainly because of European Central Bank and Bank of England meetings today. A syndicate official said that the ECB is not expected to announce an interest rate cut, but that it may comment on the three year long term repo operation (LTRO) that was carried out at the end of December.

“With ECB meetings there is always a bit of a headline risk, and there may be some movements,” he said. “People don’t like to engage on the same day as an ECB meeting.”

However, he said that the market tone was positive, with auctions of Spanish and Italian government bonds having gone well and some sovereign spreads tightening over Bunds.

Another syndicate banker said that benchmark supply may slow down, contrasting the situation this year with the state of the primary market in 2011 when peripheral issuers were active alongside those from core jurisdictions. He also pointed out that two UK issuers had tapped the sterling market instead of doing euro trades and that the senior unsecured market is attracting issuers’ attention (see separate article).

Another syndicate official said he expected benchmark supply to continue.

Except for a long four year deal for Dutch issuer SNS Bank, the pipeline is empty of publicly announced mandates – excluding ones that have been outstanding for more than one month.

SNS Bank last week announced that it had mandated DZ Bank, Natixis, Rabobank and RBS to lead manage a long four year covered bond issue. Rene Genet, debt capital markets, SNS, told The Covered Bond Report that the issuer has been exploring pricing and the level of demand for a potential deal, but that the pricing feedback it has received may deter it from proceeding with a transaction at the moment, in particular given the bank’s funding situation and alternative funding options.

“The price shown to us is quite high,” he said. “We are extremely cash rich and we have enough other options.

“It is a bit of pricing issue.”