BayernLB launched the 10th euro benchmark of the week this (Thursday) morning, a Eu500m no-grow 10 year deal that market participants said reflected a slight easing of momentum and which came after a Eu1bn issue for Caffil yesterday was one of the least oversubscribed deals of the week.

BayernLB leads ABN Amro, BayernLB, Crédit Agricole, DZ and ING went out with initial price thoughts of the 10bp through mid-swaps area, before moving to guidance of the 12bp through area and ultimately pricing the new Eu500m no-grow issue at 13bp through on the back of a book of over Eu850m.

The pricing of the 10 year issue is flat to where German peer Commerzbank priced a Eu500m no-grow 10 year on Monday, although that issue – the first of the week and the first 10 year for several months – attracted some Eu1.3bn of demand.

“It was pretty much in line with Commerzbank,” said a syndicate official away from the leads, “but you can see and feel that the momentum is easing. I would normally expect BayernLB to price in line with Commerzbank or slightly tighter because it has the benefit of the savings network, and the book is Eu400m less.

“After the mixed bag that we saw with Caffil and being on the day of the ECB and the day before non-farm payrolls, it is only normal that it is not quite as strong, especially given all the supply we have seen.”

A syndicate official at one of BayernLB’s leads described the outcome as “a pretty solid result” after the Eu11bn of issuance in the preceding five days, noting that the level was the same as Commerzbank’s. He also said that the number of accounts that participated was similar in the two deals.

“You could argue that there is a little bit of fatigue,” he said, “but it is nothing to be too concerned about. The books were over Eu850m, so there is some good demand out there.

“And historically we have not seen many tighter 10 year deals, so it is an encouraging result.”

He said that the pricing represented a new issue premium of 4bp-5bp, with fair value at around minus 18bp-17bp, although he noted that secondary levels are not useful guides given that, on the back of a lack of long dated supply, Pfandbrief curves tend to be quite flat between five and 10 years and that a steeper curve needs to be taken into account when looking at primary levels.

He also noted that, coming at 18.7bp over the Bund, BayernLB’s issue did not face what was cited as the main challenge yesterday (Wednesday) for a Eu1bn 10 year issue for Caisse Française de Financement Local (Caffil): its pricing 5.5bp through OATs.

A syndicate official at one of Caffil’s leads acknowledged that the impact this pricing and also the imminence of a 10 year OAT auction today would have on the trade was perhaps underestimated, with many French real money buyers remaining on the sidelines. OATs were also yesterday trading more cheaply than only a couple of weeks ago, he added, when May 2025 OATs had been quoted around flat to slightly minus versus swaps.

No final book size was given for the new issue, although indications of interest at the IPTs stage were said to be around Eu1bn and the syndicate official said that only one account dropped out when pricing was fixed at 3bp over following IPTs of the 5bp area. He said that the leads and issuer moved directly from IPTs to re-offer and skip a guidance stage to minimise the risk of investors dropping out.

“It was a straightforward, prudent and honest exercise,” he said. “We didn’t play around with investors.”

He said that although the leads did not release a consensus figure for the new issue premium it was at least 10bp – the highest of any new benchmark this week – based on comparables including Caffil January 2024 paper at minus 12bp and BNP Paribas May 2025s at minus 8bp.

Some 40 investors participated in the transaction, with 61% going to France – which is understood to also include Eurosystem buying under CBPP3, 26% to Germany and Austria, 7% to the UK, 3% to the Benelux and 3% to Asia. Central banks and official institutions, including the Eurosystem, were allocated 53%, banks 36%, investment managers 9%, and insurance companies 2%.

“In a market that is still fragile and volatile, Caffil as a reference issuer in the European covered bond market was able to raise a significant amount of funding with a long maturity, at an efficient cost below the benchmark OAT,” said Philippe Mills, chairman and CEO of SFIL and chairman of the supervisory board of Caffil and chairman and CEO of SFIL, Caffil’s parent.

BayernLB launched the 10th euro benchmark of the week this (Thursday) morning, a Eu500m no-grow 10 year deal that market participants said reflected a slight easing of momentum and which came after a Eu1bn issue for Caffil yesterday was one of the least oversubscribed deals of the week.

BayernLB leads ABN Amro, BayernLB, Crédit Agricole, DZ and ING went out with initial price thoughts of the 10bp through mid-swaps area, before moving to guidance of the 12bp through area and ultimately pricing the new Eu500m no-grow issue at 13bp through on the back of a book of over Eu850m.

The pricing of the 10 year issue is flat to where German peer Commerzbank priced a Eu500m no-grow 10 year on Monday, although that issue – the first of the week and the first 10 year for several months – attracted some Eu1.3bn of demand.

“It was pretty much in line with Commerzbank,” said a syndicate official away from the leads, “but you can see and feel that the momentum is easing. I would normally expect BayernLB to price in line with Commerzbank or slightly tighter because it has the benefit of the savings network, and the book is Eu400m less.

“After the mixed bag that we saw with Caffil and being on the day of the ECB and the day before non-farm payrolls, it is only normal that it is not quite as strong, especially given all the supply we have seen.”

A syndicate official at one of BayernLB’s leads described the outcome as “a pretty solid result” after the Eu11bn of issuance in the preceding five days, noting that the level was the same as Commerzbank’s. He also said that the number of accounts that participated was similar in the two deals.

“You could argue that there is a little bit of fatigue,” he said, “but it is nothing to be too concerned about. The books were over Eu850m, so there is some good demand out there.

“And historically we have not seen many tighter 10 year deals, so it is an encouraging result.”

He said that the pricing represented a new issue premium of 4bp-5bp, with fair value at around minus 18bp-17bp, although he noted that secondary levels are not useful guides given that, on the back of a lack of long dated supply, Pfandbrief curves tend to be quite flat between five and 10 years and that a steeper curve needs to be taken into account when looking at primary levels.

He also noted that, coming at 18.7bp over the Bund, BayernLB’s issue did not face what was cited as the main challenge yesterday (Wednesday) for a Eu1bn 10 year issue for Caisse Française de Financement Local (Caffil): its pricing 5.5bp through OATs.

A syndicate official at one of Caffil’s leads acknowledged that the impact this pricing and also the imminence of a 10 year OAT auction today would have on the trade was perhaps underestimated, with many French real money buyers remaining on the sidelines. OATs were also yesterday trading more cheaply than only a couple of weeks ago, he added, when May 2025 OATs had been quoted around flat to slightly minus versus swaps.

No final book size was given for the new issue, although indications of interest at the IPTs stage were said to be around Eu1bn and the syndicate official said that only one account dropped out when pricing was fixed at 3bp over following IPTs of the 5bp area. He said that the leads and issuer moved directly from IPTs to re-offer and skip a guidance stage to minimise the risk of investors dropping out.

“It was a straightforward, prudent and honest exercise,” he said. “We didn’t play around with investors.”

He said that although the leads did not release a consensus figure for the new issue premium it was at least 10bp – the highest of any new benchmark this week – based on comparables including Caffil January 2024 paper at minus 12bp and BNP Paribas May 2025s at minus 8bp.

Some 40 investors participated in the transaction, with 61% going to France – which is understood to also include Eurosystem buying under CBPP3, 26% to Germany and Austria, 7% to the UK, 3% to the Benelux and 3% to Asia. Central banks and official institutions, including the Eurosystem, were allocated 53%, banks 36%, investment managers 9%, and insurance companies 2%.

“In a market that is still fragile and volatile, Caffil as a reference issuer in the European covered bond market was able to raise a significant amount of funding with a long maturity, at an efficient cost below the benchmark OAT,” said Philippe Mills, chairman and CEO of SFIL and chairman of the supervisory board of Caffil and chairman and CEO of SFIL, Caffil’s parent.