Compagnie de Financement Foncier built the biggest order book of any covered bond this year for a Eu1bn no-grow five year transaction being priced at 8bp through mid-swaps today (Tuesday), with better relative value versus governments cited as key to its success.

Leads Crédit Agricole, Mediobanca, Natixis, RBS and UniCredit went out with initial price thoughts of the mid to low single-digits through mid-swaps, then set guidance at the 6bp through area on the back of Eu1.8bn of interest, according to a syndicate official at one of the leads. The deal was then re-offered at 8bp through mid-swaps on the back of a final order book of some Eu2.8bn, making it the tightest non-German euro covered bond benchmark of the year.

“The process went extremely strongly and quickly,” said the lead syndicate official.

He said that the issuer was only seeking Eu1bn so the size was set at this amount from the outset, which he said helped a little, even if Eu1bn is a standard size.

Outstanding CFF 2020 paper was trading at 9bp through mid-swaps, mid, and he said that the IPTs therefore incorporated a new issue concession of 3bp-5bp that is in line with those seen on recent supply. He put the ultimate new issue premium at 1bp.

A syndicate official away from the leads said that the deal came roughly flat to CFF’s curve, suggesting a stronger market than at the start of the year.

“It’s a very strong result for the issuer,” he said. “We have seen a demand for NIPs at the beginning of the year, and now the market seems to be so focused on QE that they have returned to these levels, with nice oversubscribed books.

“France yields only 7bp, so CFF still offers a good premium versus sovereign bonds. That kind of restores the crazy valuation levels, allowing issuers to price at these tight levels.”

According to the lead syndicate banker, CFF offered a pick-up of 15bp over French government bonds, and he agreed that the ECB’s announcement of sovereign QE was a factor in the deal’s success.

“There is a renewed bid from funds and asset managers given the recovery in relative value on the back of the expanded asset purchase programme and the outperformance of governments and SSAs,” he said.

“The deal also benefited from the supply-demand imbalance, and the bank treasury bid,” he added. “It is one of the best of the recent transactions.”

Some 35% of the book and allocations are understood to comprise Eurosystem buying under CBPP3, with other central banks also understood to have been involved outside the programme.

A syndicate official said that another core deal could emerge in the next day or two.