Société Générale SFH issued arguably the tightest ever non-German benchmark covered bond today (Wednesday), a Eu500m five year, while UniCredit Bank Austria attracted an almost three times oversubscribed book for the latest long dated supply, a Eu500m (corrected) 10 year deal.

Leads ABN Amro, Credit Agricole, RBC, Santander and SG launched SG SFH’s Eu500m no-grow issue without an initial price thoughts phase, setting guidance at the mid-swaps less 8bp area – the level at which French peer Compagnie de Financement Foncier (CFF) printed a Eu1bn five year obligations foncières issue on Tuesday of last week (10 February), a syndicate official at one of the leads noted.

The re-offer was then set at minus 10bp on the back of a Eu1.3bn order book, meaning the trade surpassed CFFs 2020s to become the joint tightest ever non-German benchmark euro covered bond, matched only by a Eu1bn CFF issue in May 2007 that was a two year.

The lead syndicate official said that the historically tight trade had been supported by market conditions and the pick-up offered over French government bonds, which were trading at minus 20bp, bid, this morning.

“It was a mix of both the state of the market and the fact the offer was from an issuer that is not going to the market every day,” he added. “It is an issuer well received by the market.

“This trade once again shows what a strong market we have, one that is not affected by risks such as Greece.”

He noted that a SG SFH March 2019 issue was trading at 13.5bp through mid-swaps, mid, on an i-spread basis, while SG SCF March 2020s were at 10.7bp through.

A syndicate official away from the leads said that SG SFH was coming through its own curve by half a basis point.

“It is maybe a bit of a surprise that SG could cut through their own curve, but it is not too much of a surprise,” he said. “Secondary curves are not so meaningful at the moment.

“The mechanics in the market are unchanged,” he added. “There is tonnes of cash and little supply, so any deal that comes along of decent quality can explode.”

UniCredit Bank Austria leads BNP Paribas, Deutsche Bank, ING, LBBW and UniCredit went out with IPTs of the mid-to-high single digits over mid-swaps area, tightening guidance to 5bp before setting the re-offer at 3bp, with an order book of over Eu1.4bn and 83 accounts.

A syndicate official at one of the leads estimated that the deal offered a new issue premium of around 2bp, noting that a January 2024 from Bank Austria, priced at 35bp over in 2014, is now trading at minus 1bp to flat, mid, and an Erste Group Bank 10 year, priced at 6bp on 29 January, is now at 1bp over.

He said that the deal offered a pick-up of 40bp over Bunds and 35bp over Austrian government bonds.

A syndicate official away from the leads, putting Bank Austria’s 2024s at flat to mid-swaps on the bid side, said the deal offered a very limited new issue premium.

Investors from Germany and Austria were the main drivers of the trade, the lead syndicate official said, adding that it also received “good complementary orders” from Italy.

Although some Austrian banks have suffered from exposure to Russia and related markets this year, the lead syndicate official said that no investors had raised concerns over such a risk. Worries over the impact of Greek debt negotiations and Austrian issuers’ Swiss franc exposure also do not appear to have affected the trade, he added.

“Certainly they did not exclude anyone from buying,” he said.

As well as the aforementioned Erste Group Bank 10 year, Bank Austria’s deal comes after a Eu1bn 10 year deals for Bankinter and Belfius on 27 January and 3 February, respectively, and a Eu1bn 12 year for National Australia Bank last Thursday, meaning that 10 year-plus supply has outweighed issuance in shorter maturities since the European Central Bank announced the expansion of its QE programme to include sovereign bonds on 22 January. Only one seven year benchmark has been launched in the same period, after the 2022 had beforehand been the most common maturity in 2015.