Caisse de Refinancement de l’Habitat launched its smallest benchmark in over two years on Friday, a Eu1bn 12 year deal, and CRH chairman and chief executive Henry Raymond told The Covered Bond Report that the modest size reflected subdued funding needs on the part of the French banking system.

Henry Raymond

Excluding taps, CRH last year launched two new benchmarks – a Eu2bn 10 year deal in January and a Eu1.75bn 12 year in February – and overall raised Eu5.5bn including taps.

Raymond said that while the amount CRH issues this year is dependent upon the amounts French banks wish to raise through the issuer, he expects it to be a similar amount to 2012. The last time CRH issued a new benchmark of Eu1bn or less was in September 2010, when it sold a Eu500m deal.

Raymond said that he considered that a new issue at the beginning of the year would make sense, but that he only decided to proceed with the deal last Thursday.

“Because the French banking system is not requesting a lot of funding today, it was not easy for me to reach the benchmark level,” he told The CBR.

The Eu1bn no-grow deal attracted strong demand from investors. Some Eu1bn of indications of interest were placed in half an hour at initial price thoughts of mid-swaps plus 50bp, before guidance was set at the mid-swaps plus 48bp area and then the re-offer at 46bp after orders totalled more than Eu2.5bn.

“We decided to shut the book very quickly because we had strong indications of interest beforehand and it was not necessary to go on for a very long time,” said Raymond.

Market participants said that the re-offer level was almost flat to the OAT curve, making it the tightest ever French new issue. Raymond put the deal at 2bp-3bp over. He said that although this made it a harder sell to French investors, some big French accounts were involved and the deal enjoyed strong support from Germany.

German and Austrian accounts were allocated 58% of the paper, France 30%, Switzerland 3%, the UK 3%, Italy 2%, the Benelux 1%, and others 3%. Asset managers took 40%, banks 29%, insurance companies 26%, retail 3%, and others 2%.

Barclays, BNP Paribas, Crédit Agricole, Deutsche, Natixis and Société Générale were leads.