Caffil launched the first euro benchmark-sized covered bond in three weeks today (Thursday) and although syndicate officials said the Eu500m three year trade is unlikely to catalyse further supply, it was seen as proving that liquidity is available to issuers.

The deal is the first euro benchmark-sized covered bond since a Eu500m seven year from HSH Nordbank on 15 June.

Leads BNP Paribas and Crédit Agricole priced the new Eu500m three year deal at 9bp through mid-swaps and built a final order book in excess of Eu500m, after having launched the deal with guidance of the minus 10bp to 8bp area.

Bankers suggested the deal was likely supported by large lead orders, stating that it appeared to be more similar to a club deal than a standard benchmark, despite its size, but they said this was a sensible approach to take given the wider market uncertainty.

“For Caffil, this is absolutely the right trade to do in this market,” said a syndicate official away from the leads. “It is the right name, at the right size and the right maturity.”

Another banker said the issuer had been brave to move in current conditions, even though markets today appeared relatively stable, and that the decision had paid off.

“It is always a bonus to be seen as the first to successfully brave the market,” he said.

The deal offered a 1bp new issue concession, if any, according to bankers away from the leads, who calculated that fair value was around minus 10bp based on the issuer’s secondary curve.

“It isn’t super-cheap, but then the price isn’t exactly way out there,” said one.

The syndicate official added the new issue offered a 15bp pick up over the French sovereign.

He said that relative value for covered bonds versus OATs had not moved much in recent weeks, with core covered bond spreads having proved resilient to recent volatility and with the three year OAT spread having remained within a range of minus 28bp to minus 22bp since March.

Another syndicate official cited CFF June 2018s as being quoted around minus 13bp, mid.

“That is a good pick-up and a fair level,” he said.

The new issue also offered a yield of 0.1%. Although this is less than the 0.125% offered by CFF’s Eu1.5bn three year issue – the most recent French benchmark – when rates were higher on 9 June, it is more than would have been possible in previous months before volatility in rates increased, bankers noted.

“This trade obviously would not have worked with yields where they were a few months ago, so it makes sense for them to get a three year away now,” said one.

Syndicate officials said the deal would be unlikely to reopen the euro covered bond market to further supply, with issuers expected to remain on the sidelines awaiting more clarity on Greece. They also argued that, because the deal appeared to be closer to a club deal than a typical benchmark the takeaway for other issuers is limited.

“I would not dub this a market reopener,” said one, “but after three weeks, it is at least nice to finally see some primary market activity.”

The outcome of Caffil’s new issue alone would be unlikely to encourage issuers, agreed another banker away from the leads. However, he added that other issuers were eyeing the market with a view to launching deals if an appropriate window opens next week.

“Technically, yes, this seems more of a club deal, albeit a benchmark-sized club deal, than an ordinary issue,” he said, “but if this trade really works, and there is a similar or better tone next week, I would expect one or two issuers to tap the euro market before the summer break.”

Another banker agreed.

“You have to be realistic, and I don’t think you can say that after this trade next week the market will be wide open,” he said, “but it has proven that liquidity is there to be taken if you do the right deal.”