Compagnie de Financement Foncier sold a Eu1bn 10 year no-grow obligations foncières issue today (Friday), taking advantage of a lack of long dated covered bond supply and offering an attractive pick-up versus some of its French peers.

Barclays, BNP Paribas, Deutsche Bank, DZ Bank and Natixis built a book of more than Eu2bn before reconciliation, comprising over 120 investors, this morning and are pricing the deal at 74bp over mid-swaps.

A syndicate official away from the leads said that he had been suggesting just such a deal.

“It was one of the obvious trades that would work,” he said, “with the extremely limited 10 year supply. And with a book of more than Eu2bn it proved to have been the right recommendation.”

The deal is the first 10 year euro benchmark since RLB NOe-Wien sold a Eu500m deal on 4 September and only the second such deal since early July.

The leads went out this morning with initial price thoughts of the high 70s over mid-swaps for a Eu1bn no-grow deal, before going out with guidance of the mid-swaps plus 77bp area, revising this to 74bp-76bp, and then fixing the re-offer spread at 74bp.

The syndicate official said that this was flat to the issuer’s curve, with a Eu1bn January 2022 issue launched by CFF in January trading at 71bp-72bp over mid-swaps.

“The pricing of flat to the curve is exactly where I would have put it,” he added.

Another banker away from the leads said that the IPTs of the high 70s had implied a new issue concession of around 5bp, but agreed that the ultimate pricing was roughly flat to CFF’s curve.

“So clearly it has been a successful trade,” he said. “In this market getting a level flat to secondaries should always have been very achievable.

“There is a lack of supply driving a very strong bid. CFF will also have attracted domestic investors looking for yield with this.”

The syndicate official meanwhile said that CFF offered a combination of characteristics that would have proven appealing to investors.

“They still have three triple-A ratings, but offer a nice spread and close to a 2.5% coupon,” he said.

The bankers put CFF’s deal at a significant premium to French banks such as BNP Paribas and Société Générale, with one noting that its performance has been affected by the travails of CIF Euromortgage and Dexia Municipal Agency.

“Although CFF is a different animal, it still suffers a lot because of the problems facing the other specialist issuers, and the level it came at today is simply a reflection of where relative value is seen against the big commercial banks like BNP Paribas and SG,” he said.

The syndicate official said that he was a bit surprised to have seen the deal come out on a Friday, which can be a quiet day for new issues, but that its success on such a day showed just how appealing it had been.