Caffil met with strong demand for an inaugural obligations foncières issue today (Tuesday) to allow the leads to fix pricing at the tight end of guidance for a Eu1bn deal, with bankers away from the trade saying seven years was the right maturity to have chosen.

Caisse Française de Financement Local (Caffil), the successor entity to Dexia Municipal Agency, was on roadshow the week of 24 June but let last week, characterised by a flare-up of sovereign volatility over Portugal concerns, pass before yesterday (Monday) afternoon announcing the mandate for its debut.

Syndicate bankers said the outlook for further issuance this week is unclear, but that they are hopeful other deals will follow, with conditions being conducive. One said that a successful Eu750m seven year senior unsecured deal for Abbey National Treasury Services, the first unsecured financial institution trade since the end of May, could convince issuers to come to market, more so perhaps than Caffil’s trade or SSA transactions in the market today.

Caffil leads Barclays, BNP Paribas, Deutsche Bank, HSBC and Natixis opened order books for a seven year trade this morning with initial price thoughts set at the mid-30s. Official guidance was then set at the 33bp over mid-swaps area, by which point more than Eu1bn of orders had been placed, according to a lead syndicate official.

The leads later refined guidance to 31bp-32bp over, and the leads will price a Eu1bn deal at 31bp over on the back of some Eu1.7bn of orders, with additional lead manager interest coming on top of that, according to another banker on the deal.

Slightly more than 100 accounts participated in the transaction.

“It’s a very pleasing result for an inaugural trade,” said the lead syndicate banker.

Syndicate bankers away from the deal generally deemed the transaction satisfactory, with one pleased when told earlier this morning that orders had reached Eu1.5bn – “that’s good,” he said.

Assessments of initial price thoughts varied somewhat, with the syndicate banker above referring to a 10bp concession in relation to the initial price thoughts but another seeing the initial concession at around 5bp, shrinking to around “only a couple basis points” when the guidance was revised.

“It’s pretty tight given how volatile the market has been,” he said.

A lead syndicate banker said that initial price thoughts incorporated a new issue premium of around 10bp, which came down to some 6bp at the final spread of 31bp over.

Caffil is said to have originally been eyeing a 10 year maturity for its debut, but syndicate bankers said that it had made the right choice by opting for a seven year deal.

“It’s the right way of doing things,” said one. “It looks better versus France and the interest in covered bonds has been more from relative value buyers than yield buyers so seven years makes sense.”

At 33bp over, the deal was offering a discount of some 30bp over French government bonds, he said, with seven year OATs around 1.55% this morning.

“That looks pretty good,” he said.

A lead syndicate banker said it had been a long time since a French issuer had launched a new issue with a short to intermediate maturity.

Crédit Mutual Arkéa and Caisse de Refinancement de l’Habitat launched long dated supply a week-and-a-half ago – featuring 10 and 12 year maturities, respectively – and the last French supply with a maturity shorter than 10 years was a Eu1.25bn seven year for CM-CIC Home Loan SFH in the middle of April.