Société Générale SFH attracted more than Eu2bn of demand for a Eu1bn seven year covered bond today (Monday) at what was considered a limited new issue premium after pricing was tightened from IPTs of the 20bp area to 16bp over mid-swaps.

Following initial price thoughts of the mid-swaps plus 20bp area, guidance was set at the 18bp area and the deal is being priced at 16bp over by leads Danske Bank, Mediobanca, SG, Natixis, NordLB and RBS. Orders were over Eu2.2bn when the spread was fixed at 16bp some 30 minutes before the books were due to close.

A syndicate official away from the leads described the move from IPTs to the ultimate re-offer level as “quite a jump”.

“I heard that they were even pushing for 15bp, but that too many accounts would have called it quits,” he added.

The deal comes after BPCE SFH was criticised for coming with IPTs of the 50bp area on a Eu500m 10 year covered bond last Wednesday that were widely seen as too cheap. That deal was priced at 43bp over mid-swaps, and is said to have already tightened to the high 30s.

However, SG’s move was considered more reasonable and the ultimate pricing relatively tight.

“This looks more accurate,” said the syndicate official. “It is not cheap but pretty much on the curve.

Another syndicate official away from the leads said he was positively surprised by the reception to the deal. He said the deal offered a new issue premium of around 3bp versus fair value of 13bp over, given that a March 2020 from the issuer had traded at around plus 9bp (although was squeezed and a little bit tighter just ahead of the new issue) and a high coupon January 2022 was at around 18bp.

“That’s not a lot in the current environment,” he said of the new issue premium. “My traders tell me that for every buyer there are three sellers out there at the moment, so the secondary market is clearly better offered these days.”

He said that the book of over Eu2bn at plus 16bp showed the deal to have been a success.

The last seven year French benchmark was a Eu1bn deal for HSBC SFH launched on 16 October, which was priced at 14bp over. SG SFH’s last benchmark was its March 2020, a Eu1bn deal sold at 33bp over mid-swaps on 20 February.

Bankers said that they would not be surprised to see further supply this week, even if no more new issue projects have been made public. A tap is, however, expected to be announced shortly.

Aareal Bank added Eu125m to a June 2018 mortgage Pfandbrief on Thursday afternoon, taking the total issue size to Eu625m. DZ, HSBC, LBBW and BNP Paribas were joint leads.