Crédit Mutuel Arkéa Home Loans SFH found traction for a Eu500m seven year OH today (Wednesday) in spite of weak conditions by offering value versus recent French trades and OATs, bankers said, as the market wound down ahead of an expected break for tomorrow’s Fed meeting.

Crédit Mutuel Arkéa leads BBVA, Crédit Agricole, Crédit Mutuel Arkéa, DZ and Raiffeisen Bank International launched the Eu500m no-grow seven year obligation de financement de l’habitat (OH) with initial price thoughts of the low single-digits over mid-swaps. They then moved to guidance of the 2bp area, with books in excess of Eu500m, before fixing the re-offer at 1bp.

Some syndicate officials away from the leads questioned the timing of the issue, which is Crédit Mutuel Arkéa’s first benchmark covered bond since June 2013, when it sold a Eu500m 10 year. However, they noted the leads had gained leverage to tighten the spread further than those of most of this week’s deals.

“This is a rare issuer, and you have to say their timing isn’t great,” said one syndicate official. “If you are an issuer that only comes to the market once every two or three years it is a shame to choose a week like this when the market is weaker.

“But, that said, the price is fair, it is a good name and it will be supported by the ECB, so it is not a surprise it has done well.”

Syndicate officials away from the leads calculated fair value for the new issue to be around minus 5bp based on the issuer’s curve, citing its July 2023s as being quoted at minus 4bp, bid. They added, however, that the outstandings would not be the most liquid of paper, meaning it was difficult to draw conclusions from secondary levels.

They also said the deal offered a good pick up versus seven year OATs, which were seen at minus 14bp-13bp, and versus the spreads offered by recent seven year covered bond issues – noting that 2022 issues from Société Générale SFH and CFF had earlier this month been priced at minus 8bp and minus 5bp, respectively. The syndicate officials said this difference in pricing was appropriate given the difference between the credits.

ING Belgium yesterday afternoon announced a mandate for a series of European investor meetings ahead of a possible euro-denominated benchmark issue, with leads Danske, ING, LBBW, Natixis, NordLB and Société Générale. The roadshow, which will visit Frankfurt, Munich and the Nordics, will run from Monday until next Wednesday (23 September).

The potential deal would be ING Belgium’s second euro benchmark covered bond, with its debut a Eu1bn five year issue sold in December 2013.

Other banks in the pipeline include SR Boligkreditt, Caja Rural de Castilla La Mancha, BAWAG and Hypo Tirol – all of which are on the road – while issues from Westpac NZ and South Korea’s KHFC and Kookmin are anticipated.

Syndicate officials said it is unlikely further deals will be launched this week however, with market participants turning their attention to a Federal Reserve meeting tomorrow (Thursday), at which an announcement will be made on US interest rates.

“It would be a surprise to see deals done tomorrow,” said one. “The Fed meeting is the most talked about event in the market for some time, and everyone will have their eyes on that.”

Bankers were divided as to whether the market will be in better shape next week when activity is expected to resume. Some syndicate officials said a brief hiatus of issuance would allow demand to rebuild, after some issues launched earlier in the week were only marginally subscribed.

“It depends on what the Fed announces, but I am confident that next week the market will have a better tone,” said a syndicate official. “It will be good for both the primary and secondary markets to have a break from issuance as there has been too much supply and too much of it concentrated in the seven year bucket.

“After that break we will have a better market.”

However, others saw conditions as being unlikely to improve.

After Deutsche Kreditbank yesterday (Tuesday) printed a Eu500m eight year deal, Thomas Pönisch, head of treasury at DKB, said the issuer had decided to tap the market on an opportunistic basis given the favourable interest rate and spread levels.

It considered yesterday the best time to launch the deal in order to get the deal done before Thursday’s Federal Reserve meeting and any further uncertainty regarding Greek elections on Sunday, Pönisch said.

“We found the market environment to be good enough, and that was the unanimous opinion of all the leads,” he said. “After talks on Monday, we decided yesterday would be the right time to go.

“In the end we do not expect that the market will be any better next week or the week after.”

The public sector Pfandbrief gathered Eu550m of orders and was priced at mid-swaps minus 11bp – in the middle of guidance, which followed IPTs to the minus 10bp area.

Pönisch added that the deal was solid, even if it was not comparable to those launched earlier in the month after the market’s reopening.

“This outcome is good for the issuer considering the softer market tone,” he said.