Caffil and at least one other core issuer are said to be candidates for issuance early next week, although the outlook is uncertain after deals for Crédit Mutuel Arkéa, CRH and Münchener Hyp yesterday (Thursday) suggested investors are still nervous about rates.

Münchener Hyp, Munich

Caisse Française de Financement Local (Caffil), the successor entity to Dexia Municipal Agency, has been on the road this week. Barclays, BNP Paribas, Deutsche Bank, HSBC and Natixis were mandated by the French issuer.

A banker away from Caffil’s leads said that with the market again steady so far today (Friday), more investors could be willing to get involved next week. However, another said that the monthly ECB meeting and US non-farm payrolls are just two other events that could increase nervousness and uncertainty again.

The first also said that the outcome of this week’s deals could increase the level that issuers might have to pay, with a 5-handle now being necessary if Caffil were to opt for a 10 year deal, for example. He suggested that a shorter maturity, such as a seven year, might be a better move if the issuer has the flexibility to do so, given that investors’ sensitivity to rates is more likely to affect a deal of 10 years or longer.

He said that a positive sign was that Crédit Mutuel Arkéa’s 10 year deal, which was sized below the targeted Eu700m at Eu500m, had not widened and that there had been follow-through buying. Leads BAML, Crédit Agricole, Credit Suisse, DZ Bank and UniCredit priced the Crédit Mutuel Arkéa Home Loans SFH deal at 48bp over mid-swaps.

A syndicate official at one of the leads said that although the back-up in rates had moved them to levels where certain investors’ yield bogeys would be hit, they turned out to have been “somewhat distracted” by the recent volatility and were unsure how to proceed. This meant that although a good number of accounts still participated – 39 were allocated bonds – some came in for smaller sizes than usual.

“We didn’t get the traction to do the full Eu700m, but the issuer was very sensible and sized the issue to demand,” he said. “They could have done Eu700m and left bonds on the leads’ books, but that would not have helped the secondary market performance.”

France accounts took 41% of the paper, Germany and Austria 34%, the Benelux 14%, Switzerland 6%, the UK 2%, and others 3%. Insurance companies were allocated 41%, banks 34%, asset managers 20%, and SSAs 5%.

Leads BNP Paribas, LBBW, Natixis and SG priced CRH’s deal at 47bp over mid-swaps, following guidance of the 48bp area after taking orders of Eu600m.

“The market is very volatile, very difficult, but for us it was alright,” said Henry Raymond, chairman and chief executive officer of CRH. “Our deal was a Eu500m no-grow and we succeeded in getting Eu500m, and more than Eu500m of demand.

“It was also possible to tighten it a little and print inside guidance.”

Germany and Austria were allocated 42% of the issue, France 31%, the UK 14%, the Benelux 7%, Switzerland 4%, and others 2%. Insurance companies took 39%, asset managers 34%, banks 22%, central banks and agencies 4%, and others 1%.

Raymond said that because the issuer funds on behalf of the French banking system it is more a question of waiting for demand to come in from French banks than waiting for a better market to issue into.

“Maybe we will fine tune by a day or two if the market is particularly stormy,” he said, “but there is not trade-off in terms of timing.”

Raymond nevertheless said that it was not ideal issuing in a market where there were several issuers coming at the same time.

“But that’s life, and for us it was OK,” he added.

Meanwhile a banker at one of Münchener Hypothekenbank’s leads – BNP Paribas, BayernLB, DZ, LBBW, NordLB and WGZ – said that the launch of further issues in the wake of the German bank’s deal was a compliment to it.

“Münchener Hyp at least successfully opened the market with a competitively priced and fully subscribed deal that catered to specific investor demand at the very long end,” he said, “with no book inflation, realistic guidance and showing investor responsiveness. What’s wrong with that?

“The fact that other issuers piggybacked on it seems a good endorsement to me.”

The pricing of the Eu500m 15 year deal at the wide end of guidance of 15bp-17bp had led some market participants to question how well the deal had gone, but an official at the issuer said yesterday that tighter pricing had been possible and the 17bp spread had been decided to reward investors’ commitment (see yesterday’s article for more).

Münchener Hyp’s order book totalled Eu600m, comprising 39 accounts.

German accounts took 92.9% of Münchener Hyp’s deal, Switzerland 5.7%, France 1.3% and the UK 0.1%. Insurance companies were allocated 46.1%, asset managers 25.2%, banks 20.7%, pension funds 4%, and others 4%.