HSBC SFH (France) will today (Wednesday) price a Eu1bn seven year covered bond that was announced after credit markets proved largely undeterred by the latest twist in US debt ceiling wrangling, while Banca Carige is planning to return to the market after a lengthy absence.

HSBC’s transaction is the French issuer’s second benchmark of the year, although it remains a rare issuer overall. HSBC SFH’s other deal this year was a Eu1.25bn 10 year, which was its first benchmark in over three years.

HSBC France headquarters, Paris

Today’s Eu1bn seven year obligations de financement de l’habitat issue will be priced at 14bp over mid-swaps by a seven-strong lead manager line-up, comprising ABN Amro, Banca IMI, BBVA, Erste Bank, HSBC, Natixis, and Swedbank.

This came after initial price thoughts of the high teens, with guidance subsequently set at 16bp over plus/minus 2bp, with the leads having collected Eu1.75bn of orders by around 15 minutes before they were due to close the order books. More orders are understood to have been placed in the interim. A final order book size was not available by the time of publication. [Update: The final orderbook was in excesss of Eu2.7bn]

More than 100 accounts participated in the transaction, according to a syndicate banker at one of the leads.

Syndicate bankers away from the deal said that at 14bp over, the deal is coming fairly flat to secondaries, perhaps with a small new issue premium of 1bp-2bp, an assessment that chimed with that of the lead syndicate banker.

The deal is the first new issue in benchmark covered bonds this week as market participants continue to track the fate of US debt ceiling negotiations ahead of a Thursday deadline for the federal government to avoid a potential default on its debt. Sentiment in the euro market has been fairly resilient to the US situation, however, reflecting a widespread belief that an agreement will be reached in time, according to syndicate bankers.

Nonetheless, Fitch yesterday (Tuesday) evening put the US’s rating on negative watch after a fresh failure of negotiations to bear fruit, and a syndicate official on HSBC’s deal said that the issuer wanted to wait to see the market’s reaction to this before announcing the new issue.

This was deemed supportive for a deal from a rare and safe haven issuer such as HSBC France, according to the syndicate official, with cash markets better bought despite credit indices for senior financials and subordinated debt wider on the open this morning.

What was “probably the worst open post the US shutdown”, however, had an impact on how the leads approached the initial marketing of HSBC’s deal, according to the syndicate banker on the deal.

An investor had remarked – and welcomed – that HSBC had set guidance at fixed spread range, even though this still represented tightening from initial price thoughts (IPTs) of the high teens. He added that the high teens was the wrong starting point and that market participants would have been fine with tighter IPTs of mid to low teens, although he was positive overall.

The syndicate official on the deal said that the leads would have wanted to give a fixed spread range for IPTs and probably would have done so had the US debt ceiling uncertainty not been hanging over the market. The issuer was also targeting a larger, Eu1bn deal and the leads were mindful of wanting to generate good initial interest in the new issue.

Meanwhile, Italy’s Banca Carige is planning to return to the benchmark covered bond for the first time in more than two years, having today (Wednesday) announced the mandate for a benchmark obbligazioni bancarie garantite (OBG) issue.

Seven investment banks were mandated: Barclays, Deutsche Bank, Natixis, Raiffeisen Bank International, RBS, UBS and UniCredit. Any deal is due to come with a medium term maturity, which The Covered Bond Report understands means three to five years.

Carige last tapped the benchmark covered bond market in March 2011, with a Eu500m four year deal.

A syndicate official at one of the mandated banks said that, after a lengthy absence from the market, the issuer’s first focus is on assessing the investor response to the mandate. A deal could be launched this week, but no decisions have been made about timing, which is subject to market conditions, he said.

The mandate announcement comes after a banner week for Italian covered bonds last week, with three issuers away from the national champions selling deals totalling Eu2.75bn. (See here for previous coverage.)