France’s Caffil is eyeing another benchmark covered bond in the autumn after having yesterday (Tuesday) achieved a smooth execution and “very satisfactory” order book for its debut, a Eu1bn seven year deal, according to an official at the issuer.

Orders totalling Eu1.7bn were placed for the public sector backed obligations foncières issue, allowing leads Barclays, BNP Paribas, Deutsche Bank, HSBC and Natixis to size the deal at Eu1bn and price it at 31bp over mid-swaps. This represents the tight end of guidance that was revised from the 33bp over area to 31bp-32bp over, after initial price thoughts of the mid-30s.

The transaction is the first for Caisse Française de Financement Local, the successor entity to Dexia Municipal Agency, and follows a roadshow that involved discussions with more than 70 investors in Austria, France, Germany, the Netherlands, Nordics and the UK, according to an official at Caffil.

“We are very pleased with our inaugural covered bond benchmark,” he said. “Execution went smoothly and we are very satisfied with the size and the quality of the order book.

“Over 100 investors participated, with a significant participation from large European asset managers and insurance companies but also very important tickets from Asian central banks.”

German and Austria accounts took 44%, France 17%, the UK 9%, Asia 8%, the Nordics 7%, the Benelux 5%, southern Europe 4%, the Middle East 3%, and others 3%. Investment managers dominated allocations, buying 51% of the bonds, banks and financial institutions 31%, central banks 11%, and insurance companies 7%.

Philippe Mills, chairman of the supervisory board at Caffil, said that yesterday’s deal marks Caffil’s arrival as a regular benchmark issuer on the market.

“In parallel, Caffil will propose private placements to investors interested in long dated transactions,” he said. “We expect a total issuance volume for 2013 of Eu2.5bn, including another benchmark issue in autumn.”

At 31bp over mid-swaps, the deal came with a pick-up of 27.4bp over French government bonds, said Laurence Ribot, syndicate at Natixis.

A syndicate banker away from the leads saw the discount over OATs somewhat larger, in the low to mid-30s, and Ribot said there was some volatility in OATs yesterday.

“The spread was larger in the morning, but OATs were wider when we priced,” she said.

Ribot said that a new issue premium of some 6bp was incorporated in the final re-offer spread for Caffil’s bonds, reflecting a “new market paradigm” that has established itself since the end of May.

“A clear new issue premium was something that was absolutely necessary,” she said.

Orders for the Caffil new issue initially came in at a relatively subdued pace, according to Ribot, with some Eu900m being registered during an indications of interest phase that lasted some 1.5 hours.

“The market was fairly busy yesterday morning, so a lot of accounts were also looking at other deals,” she said, “and things accelerated when we opened the books on Caffil.”

The issuer is said to have initially had a 10 year maturity in mind for its inaugural deal, but the Caffil official said that during the roadshow investors expressed a clear preference for a seven year transaction, with particularly strong interest coming from asset managers in Germany and in the Nordic countries.

“On this basis, we decided to announce an inaugural seven year benchmark yesterday,” he said.

Ribot said that the decision was pragmatic, taking into account the market situation and that this was an inaugural deal for which the issuer wanted to attract strong demand.

“In addition it was about achieving a well diversified placement of the bonds,” she said. “The issuer’s roadshow was extensive and it was important to validate the interest from that, with a seven year maturity appealing to a broader range than a 10 year maturity.”

A syndicate banker away from the leads had early yesterday morning queried the level of French participation, but Ribot said that a 17% share was relatively strong given that domestic accounts are typically not focussed on the seven year part of the curve.