France’s CM-CIC drew solid demand today (Tuesday) for a Eu1bn 10 year covered bond, while a Eu500m five year for Ireland’s AIB attracted weaker interest, but more supply is expected in the shape of a La Banque Postale trade tomorrow.

The trades were launched into a market that a syndicate banker on CM-CIC’s trade said was positive and supportive overall, overcoming some disturbance triggered earlier in the morning by reports of a missile being launched toward Syria. There was some selling in secondaries, he said, but mainly in anticipation of upcoming supply.

However, new issues need to come with guidance that is fair in order to work well, he added.

Another syndicate banker echoed this perspective, saying that market conditions are “optically very good” but that new issues need to be executed with caution.

“Everything is working fairly well, but a tick slower than I would have expected and deals aren’t flying,” he said. “You still have to be careful.”

La Banque Postale SFH could be the next issuer to test demand given that it is expected to announce a transaction this afternoon with execution targeted for tomorrow. A seven year maturity has been mentioned in connection with a deal, which would be the issuer’s debut in the benchmark covered bond market. It has roadshowed with Natixis and UniCredit.

France’s Crédit Mutuel-CIC Home Loan SFH will price a Eu1bn 10 year obligations de financement de l’habitat issue at 36bp over mid-swaps today, after guidance of the 37bp over area and initial price thoughts of the high 30s.

Some Eu1.5bn of orders from 75 accounts were placed for the deal, the issuer’s second euro benchmark this year, according to a syndicate banker at one of leads Barclays, Deutsche Bank, Natixis and Nomura.

The spread over French government bonds is typically a key focus for French covered bond investors when it comes to long dated issuance, and syndicate bankers said that today’s transaction for CM-CIC had to deal with OAT spreads being fairly wide versus swaps, in the low 30s over for the 2023 maturity range.

The lead syndicate official said that this meant that CM-CIC’s transaction offered a fairly limited pick-up over OATs, but that there was some decent participation from domestic investors in spite of this.

A syndicate banker away from the deal put the new issue premium at around 8bp-10bp, saying this was necessary to be able to offer a pick-up over the sovereign.

Demand for an AIB Mortgage Bank covered bond was weaker, with leads BNP Paribas, Deutsche Bank, JP Morgan and Royal Bank of Scotland building an order book of Eu650m for a Eu500m five year Asset Covered Security.

They will price the deal at 180bp over, after having initially marketed it at 180bp-185bp. The 180bp over re-offer level compares with a spread of 165bp for Irish five year sovereign paper, according to a syndicate banker away from the leads.

AIB’s trade, alongside of a Banco Popular Español trade yesterday (Monday) and other recent peripheral transactions, suggests that interest for peripheral supply is declining, he said.

“It looks like the heat is coming out of the peripherals,” he added. “AIB’s deal is a trade done, but the depth of the investor base is waning a bit on lower spread performance potential.”

Another syndicate banker away from the AIB leads put the new issue premium at 10bp for the new, September 2018 issue, seeing an AIB Mortgage Bank June 2017 ACS at 165bp.

Banco Popular Español yesterday priced a Eu750m four year cédulas hipotecarias transaction at 240bp over on the back of some Eu900m of orders via 100 accounts, with Bank of America Merrill Lynch, BBVA, BPE, Credit Suisse and Natixis as leads. The issuer is understood to have been targeting a Eu500m minimum deal.

Spain took 40%, Germany and Austria 15%, the UK 14%, Portugal 12%, Italy 7%, Nordics 6%, and others 6%. Asset managers were allocated 39%, banks 25%, insurance companies and pension funds 26%, and others 10%.