Caisse de Refinancement de l’Habitat launched a Eu1.75bn 12 year deal this (Monday) morning that attracted more than Eu3bn of orders, with the yield level a topic of discussion among market participants against the backdrop of a softer tone today.

Leads Barclays Capital, BNP Paribas, Crédit Agricole, Natixis, RBS and UBS set guidance of the 125bp over mid-swaps area, before revising this to 120bp-125bp and then fixing the spread at 120bp over.

A syndicate official at one of the leads put the final new issue premium at 10bp compared with outstanding CRH 2022s at 110bp before the deal was announced.

“Today’s CRH demonstrates how well the signature is perceived and confirms the exceptional liquidity situation in the market ahead of the second longer term refinancing operation (LTRO),” he said, “and after a week of rather limited supply in covered bonds.”

Books were closed above Eu3bn, with more than 130 accounts participating.

“There was a high level of granularity for this 12 year euro benchmark,” said the syndicate official. “It was very well oversubscribed and diversified order book, with very good demand out of France, Germany, Asia, and the UK.”

He noted it was a long awaited benchmark on the back of an extensive roadshow, mainly in Asia.

A syndicate official away from the leads said it was obvious the trade had done well.

“The worsening market as we move toward lunch time has not had an impact on the trade,” he said.

“I would have expected some investors would have been deterred by the yield under 3.75% – it’s 3.65% – but given that there was a book of Eu3bn, that didn’t happen.”

Another syndicate official away from the leads said he thought the deal was attractive for investors because the yield was above 3.5%, but added he thought the trade could have been priced closer to 115bp over.

“Saying that, it will probably tighten in secondaries,” he said.

Another syndicate banker away from the deal said there was some debate over the yield target, which he understood to have initially been 3.75%, but that the market moved in the meantime and the level of demand showed investors were not bothered by a sub-3.75% yield.

“Clearly people are adjusting their yield targets lower,” he said, “and it looks like 3.5% is the new minimum target.”

He put the new issue premium at between 10bp-15bp, and suggested that CRH’s deal was lapped up at least partly because of a lack of supply.

“The market has been starved of paper across the curve,” he said. “There’s been a massive build-up, trading desks are taking shorts, so I can’t say I’m surprised [by CRH’s deal].”

A covered bond banker away from the leads said the deal was great.

“It was very decently sought after, so it’s a nice one,” he said.

Ted Lord, head of European covered bonds at Barclays, said that interest in CRH had also encouraged some investors to go further along the curve than usual.

“CRH continues to attract strong demand for longer dated issues given their special law and the cover pool including the best mortgages of the leading French banks,” he said. “What is interesting to note is that many investors go off-index to purchase these issues given their faith in the name in strong markets as well as weak markets.”

With a maturity of 12 years, CRH’s benchmark is also outside the eligibility criteria of the ECB’s second covered bond purchase programme.

Syndicate officials said the pipeline is relatively bare.

A syndicate official had heard a rumour about a five year obbligazioni bancarie garantite issue for UniCredit.

“But it looks like it has not decided whether to go with senior unsecured or covered,” he said.

A syndicate banker familiar with UniCredit’s thinking had previously played down the chances of the issuer launching a covered bond in the near future.

Spain’s Bankinter is also seen as a candidate for issuance this week, with one syndicate banker expecting the issuer to wait until after the second ECB LTRO on Wednesday to come to market, and another saying he would be surprised if the bank did not emerge with a deal this week.