France’s BPCE met with solid demand for a Eu1bn February 2018 covered bond that was the only euro benchmark FIG supply in the market today (Tuesday), with bankers expressing some surprise at the lack of new issuance given strong, though slightly softer, conditions.

The long five year deal is the first covered bond supply to hit the primary market this week, which got off to a much slower start than last week although the corporate market is, according to a syndicate official, “rocking”.

Several new issue projects are said to be under consideration, but may not necessarily materialise in part because issuers are relatively relaxed about their funding programmes.

Another syndicate banker said he is somewhat surprised that more FIG supply has not been launched this week, but that this is at the same time understandable.

“It shows that with the conditions we’ve had over the past month most of the deals in the FIG pipeline have already come,” he said. “We need to see funding teams get the fear about market conditions or switch to thinking about prefunding for 2013.”

The outcome of independent stress tests on Spanish banks, due to be announced at the end of the month, could inject that element of fear, he said.

Market consensus, said another syndicate banker, is that the Spanish government will not be able to avoid asking for external support, with the timing and conditions attached to the aid the main questions.

“The hype over Spanish govvies is over,” he said.

BPCE SFH will price the long five year obligations à l’habitat issue at 40bp over mid-swaps, the tight end of guidance of 40bp-42bp over, after leads Banco Santander, BNP Paribas, Deutsche Bank, JP Morgan and Natixis gathered Eu1.5bn of orders from 75 accounts.

The deal is BPCE’s third offering of benchmark covered bond supply this year, coming after a Eu850m tap of a 10 year deal in January and a Eu1.25bn new five year issue in February [amended]. It is only the second French issue since the middle of June, after Axa Bank Europe SCF, which issues under France’s obligations foncières framework although the collateral is Belgian RMBS, sold a Eu500m seven year at 52bp over last Tuesday (11 September).

The last new French benchmark covered bond to be sized at Eu1bn or more was a five year Axa issue that was re-offered at 70bp over at the beginning of April.

Syndicate officials away from BPCE’s transaction said the new issue premium was modest, with one saying that the order books grew surprisingly slowly.

“There’s no big momentum in the market,” said one. “The deal worked – it was solid, but didn’t bowl me over.”

He saw a BPCE February 2017 issue at around 31bp-32bp over mid and a September 2021 issue in the mid-50s, and said that today’s deal was not a “must have”.

“It’s not a bargain,” he said.

He suggested that the time for pricing new issues flat to the curve was over except for rare issuers launching smaller deals, and that the order books would have built more quickly had a larger new issue premium been offered to entice investors.

Another syndicate banker said BPCE’s transaction was coming fairly flat to the issuer’s secondary market curve, but that this was fair in the context of the market.