CM-CIC Home Loan SFH yesterday (Monday) priced a Eu1.25bn seven year covered bond without any new issue premium, benefitting from “brilliant” transactions from two of its French peers that helped lure the issuer into the market, said a lead syndicate banker. The issuer also raised £250m in sterling.

Yesterday’s deal was CM-CIC’s first euro benchmark covered bond since January 2012, and goes toward satisfying modest funding needs for 2013, said a syndicate banker at one of the leads – BNP Paribas, Danske Bank, HSBC and Natixis.

The transaction was priced at 23bp over mid-swaps, the tight end of guidance of the 25bp over area that followed initial price thoughts of the high 20s. At the IPT stage, investors were being offered a new issue premium of some 5bp to the interpolated seven year point of CM-CIC’s outstanding curve, but Jacob Truelsen, head of frequent borrower syndicate at Danske Bank, said that at 23bp over the deal was priced flat to the bid side of the curve.

“CM-CIC trades a few basis points wide of BNP Paribas, but came only 1bp wide of BNP Paribas,” he added. “That would not have been do-able last week, but CM-CIC was able to join the party while it was still going on.”

Five new euro benchmark covered bonds plus a tap were priced last week to account for Eu4.75bn of supply, more than in the entire month of March, with deals for HSBC SFH and BNP Paribas Home Loan SFH among them. HSBC SFH priced a Eu1.25bn 10.5 year at 35bp over while BNP Paribas re-offered a Eu1bn no-grow seven year deal at 22bp over, with each deal attracting around Eu4bn of orders.

Like CM-CIC, BNP Paribas and HSBC offered new issue premiums in the IPT process, said Truelsen. Their transactions performed strongly in the secondary market, with HSBC’s tightening by around 8bp-9bp and BNP Paribas’ by 4bp-5bp, he said.

CM-CIC was encouraged to come to the market to take advantage of the “hot” market despite having low funding needs, said Truelsen.

“With everything tightening and two brilliant transactions last week, you have to react,” he said.

Another lead syndicate banker said that CM-CIC is “a different name” to the likes of BNP Paribas and HSBC, and that pricing at the same spread over OATs (25bp) as BNP Paribas and getting a Eu2bn book so quickly in the wake of last week’s French deals was a positive result for CM-CIC.

The order book for CM-CIC’s deal is half that for HSBC’s and BNP Paribas’ deals, and Truelsen said that this could be a sign of some normalisation in the market.

“Last week was like a fairy-tale, but this week feels a bit more normal,” he said. “It may be time for some spread consolidation because although these tight levels are good for funding the hunt for yield risks driving spreads to levels that do not make sense.”

French issuers are raising funding at levels that have not been seen for several years, he said, with French covered bond spreads close to Nordic levels and the gap to German Pfandbriefe narrowing.

By investor type it was demand from bank treasuries that drove CM-CIC’s transaction, a general trend also visible in BNP Paribas’s and HSBC’s deals, with these accounts allocated 47% of the bonds. Fund managers took 31%, central banks and official institutions 12%, insurance companies and pension funds 8%, and others 2%.

The geographical distribution was the most international of any CM-CIC euro covered bond, according to another lead syndicate banker. Germany and Austria took 35%, the Nordics 21%, France 11%, the UK and Ireland 11%, Italy 8%, the Benelux 8%, and others 6%. At 23bp over 85 accounts participated in the transaction.

Sterling afternoon move

CM-CIC was also active in the sterling covered bond market yesterday, raising £250m (Eu293m) via a three year floating rate note. Sole lead HSBC priced the deal at 30bp over three month Libor, in line with guidance of the 30bp over area, which a banker on the deal said was equivalent to 1bp through six month Euribor.

This is an aggressive level given that the issuer’s July 2016s are marked at around 7bp over in euros, he said, and was seen as such but accepted by accounts.

The deal was driven by some reverse enquiry, and was announced yesterday afternoon once the issuer’s euro benchmark had advanced far enough, with the afternoon used to build order books on the sterling transaction.

“It was a good day for the issuer,” he said, “and good to get the focus on the sterling market again and plant another European flag.”

CM-CIC’s sterling deal is the fourth covered bond in the currency this year, and the lead syndicate banker said it is the first French new benchmark covered bond in sterling since a Compagnie de Financement Foncier deal in 2007.