BPCE SFH priced a Eu1.5bn six year issue yesterday (Wednesday) on the back of the strongest show of demand so far this year for a core euro covered bond, and a lead syndicate official said the intention was to offer investors value amid signs of a more selective and softer market.

Some Eu2.4bn of orders were placed for the obligations de financement de l’habitat (OH) issue, the most for any benchmark covered bond from a core issuer this year, albeit not by any overwhelming amount – Nordea Bank Finland built an order book of some Eu2.25bn for a Eu1.5bn five year that was priced at 7bp over mid-swaps on 7 January, for example.

Leads ABN Amro, BNP Paribas, Commerzbank, Danske, LBBW and Natixis priced BPCE SFH’s issue at 24bp over mid-swaps, after having started the sale process with initial price thoughts (IPTs) of the mid to high 20s over. Guidance was set at 25bp-27bp over, with demand from Nordic bank treasuries in particular helping to create momentum, and allowing the guidance to be revised to the 25bp over area, according to a syndicate banker on the deal.

Syndicate officials away from the deal said that the spread was attractive, putting fair value based on an interpolated BPCE curve at 16bp-20bp over, with the five to seven year part of the curve steeper than at the longer end. Another syndicate official said he saw a somewhat tighter new issue premium, at 3bp-4bp.

Laurence Ribot, fixed income syndicate at Natixis – one of the leads alongside ABN Amro, BNP Paribas, Commerzbank, Danske and LBBW – said that at pricing, the final new issue amounted to 5bp and that the intention had been to market the deal at a spread offering value for investors.

“The consensus was that 25bp over would be a fair starting point for a Eu1bn six year,” she said, “but we decided to go for the mid to high 20s instead of the mid-20s given that the market tone has been slightly heavier although not negative, and investors seem a bit more selective.

“BPCE is not a rare issuer so were conscious of wanting to offer investor value,” added Ribot. “That came in part from the unusual six year maturity and then from the spread, which we adjusted for market sentiment and selectivity among some accounts.”

A not inconsiderable number of investors participated in BPCE’s deal on a switch basis, she said, and offering value was important to entice them to do so.

“The idea was to avoid going to market with a spread that would not interest investors and to instead offer a deal that would reassure investors and perform,” added Ribot.

The target was a Eu1bn deal, but with Eu2.4bn of orders in the book sizing the deal at Eu1.5bn felt justified, she said, not least because BPCE does not have plans to sell a new five year issue this year.

The deal closed 1bp tighter yesterday, she added.

Some 108 investors participated in the deal, with an “extraordinarily high placement” outside France, according to another syndicate banker on the deal. Germany and Austria took 40%, the Nordics 22%, the Benelux 16%, the UK and Ireland 9%, France 6%, Asia 5%, and Switzerland 2%.

Asset managers were allocated 47%, banks 39%, public institutions 8%, and insurance companies and pension funds 6%.

The settlement date of BPCE SFH’s deal was fixed for the day after a Eu3.5bn Compagnie de Financement Foncier covered bond redemption, according to one of the leads. Like BPCE SFH, CFF is part of the BPCE group.