Restrained demand for a Eu750m long 10 year deal for BPCE SFH today (Thursday) as well as a weak aftermarket performance of a Eu3bn dual tranche Santander benchmark issued yesterday prompted bankers to suggest that the frenzy of CBPP3-inspired buying has lost steam.

Leads ABN Amro, DZ, Natixis, NordLB and Nykredit went out with initial price thoughts of the low single-digits over mid-swaps this morning for the Eu750m no-grow February 2025 issue. They then set guidance at 1bp (+/-1bp) and re-offered the paper at 1bp over.

A lead banker said that there significant orders that had been limited rather than at re-offer, and acknowledged that the IPTs had been ambitious, while a syndicate official at another of the leads said that going any tighter than 1bp to flat would not have been possible.

The syndicate official said that the deal was oversubscribed and demand was “solid” – a late update put the book at Eu850m, with CBPP3 interest understood to be around Eu350m of this – but he acknowledged that the deal had not witnessed the “overwhelming” demand of most deals launched since the start of the European Central Bank’s third covered bond purchase programme.

“It seems the madness is out of this market,” he said. “It was a sober exercise.

“This was far less crazy than BNP Paribas.”

A Eu500m 10 year BNP Paribas Home Loan issue launched on 4 November was priced at 3bp through mid-swaps.

Another banker away from the leads noted that many of the recent CBPP3-eligible deals – although not including BNP Paribas’ – were trading wider than re-offer.

He said that some concerns about the size taken out of the market by Santander yesterday (Thursday) when it sized a dual tranche 10 and 20 year deal at Eu3bn on the back of a Eu3.75bn book appeared to have been borne out by it widening from re-offers of 23bp and 43bp, respectively, to 25bp and 45bp today. He said CBPP3 support for the two deals appeared to have been “massive”, with distribution to central banks and official institutions of 43% and 36%, respectively. Distribution split by geography to “others” was 41% and 36%, respectively – on previous CBPP3-eligible deals the “other” category has been used to capture Eurosystem buying.

“Spain seems to have run out of steam,” said the banker.

He noted that Italian deals had held up better, with a Credito Emiliano deal a touch tighter than re-offer and a UBI Banca issue a touch wider.

“Issuers will now have to be a bit more generous than they would like, so things may get quieter.”

The other placement of the Santander 10 year was split 24% Germany and Austria, 14% France, 6% UK and Ireland, 4% Iberia, 3% Netherlands, 3% Asia, 3% Italy, and 1% Switzerland, with asset managers allocated 35%, banks 14%, insurance companies 5%, and others 3%.

The balance of the 20 year was split 34% Germany and Austria, 6% Asia, 6% Iberia, 5% Switzerland, 5% Netherlands, 4% France, 4% Finland, 3% UK and Ireland, and 1% Italy, with asset managers allocated 33%, insurance companies 13%, banks 10%, pension funds 4%, and others 4%.

WL Bank meanwhile tapped a Eu650m September 2024 mortgage Pfandbrief at 12bp through mid-swaps – equivalent to 5.9bp over the Bund. The deal is only the second benchmark covered bond supply to have come from German issuers since the start of CBPP3, after LBBW on Monday increased a June 2018 mortgage Pfandbrief by Eu250m at 22bp through mid-swaps.

That tap is understood to have been driven by Eurosystem buying, while today’s WL Bank tap was said to have met with broader demand, even if the size was more modest. A syndicate official at one of the leads – Deka, DZ, LBBW, UBS, UniCredit and WGZ – said that some Eu330m of orders were placed after IPTs of the less 10bp area, which was followed by guidance of less 12bp to less 11bp, versus a secondary level of less 10bp, bid.