CRH was lured into the market yesterday (Wednesday) to tap a 3.6% 2024 issue for Eu750m by a combination of strong demand, a considerable gap since its last issue, and conditions supportive of a long term trade, according to the issuer’s chairman.

The increase took the size of the outstanding bond to Eu2.5bn, and was priced at 103bp over mid-swaps on the back of some Eu1.2bn of demand via leads Barclays, HSBC, Natixis, and Société Générale. Guidance had been set at the 105bp over area.

Henry Raymond

Henry Raymond, chairman and chief executive of Caisse de Refinancement de l’Habitat (CRH), said that because the deal was capped at Eu750m he did not want the order books to be kept open unnecessarily long.

A syndicate banker away from the leads put the spread over the October 2023 OAT at 19bp, while another said the 103bp over mid-swaps equated roughly to 10bp over the French government curve swap valuation.

Mark Pearce, syndicate, HSBC, said that the pricing was historically tight  for French covered bond spreads over agency and government bond levels, putting the spread over  the interpolated OAT curve in the context 12bp-15bp.

“On an interpolated basis we saw it tighter than the CADES 25s tap that came at 17bp over the October 2025 OAT, also historically tight to govvies.”

At 103bp over mid-swaps CRH’s tap came flat to 2bp back of its secondary curve on the bid side, and 5bp-6bp wider from the mid, according to Pearce.

“It shows how strong the market is for well-liked names, given lack of supply, high redemptions and therefore high investor cash balances that they are having to invest despite low yields,” he said.

“It’s positive for France that both CADES and CRH were able to come to market with successful transactions.”

CADES, France’s social security debt repayment fund, on Tuesday added Eu1bn to a 4% December 2025 benchmark at 17bp over OATs, equivalent to 120bp over mid-swaps.

Raymond said the spread was optically tight, but that the absolute yield was more important for long term investors and that the deal was able to offer a yield in excess of 3%. The deal came with a 3.6% coupon and was priced at 104.844 to yield 3.099%.

He played down the relevance of elections in Greece this weekend to the timing of CRH’s transaction, saying that launching a deal in anticipation of a market downturn is not in CRH’s nature given the issuer’s focus on maintaining a sustainable market presence.

“We kicked off the process because it had been a long time since we had issued, because there was demand, and because market conditions were such that they allowed for supply in 12 years,” said Raymond. “Given the demands placed on CRH’s shareholders in terms of cross-commitments and such it is only fair to reward them with long term funding wherever possible.”

CRH last came to the market at the end of February, with the Eu1.75bn March 2024 bond that it tapped yesterday. Raymond said CRH is likely to be less active in the covered bond market this year than last, when it raised some Eu12.3bn of funding, given that its shareholder banks’ financing needs are lower and a decent amount of pre-funding was carried out last year.

Some 56 accounts participated in the transaction, with France taking 46%, Germany and Austria 39%, the Benelux 6%, southern Europe 3%, Switzerland 2%, the UK 1%, and others 3%. Insurance companies were allocated 62%, fund managers 23%, banks 12%, and others 3%.