Crédit Agricole “ticked every box” to attract Eu1.9bn of orders for a Eu1.5bn OH today (Thursday), by moving quickly in the right window, opting for a long four year, and offering a suitable premium, according to syndicate officials, who said others will need to be similarly reactive in a choppy market.

Crédit Agricole Home Loan SFH’s deal is the first benchmark covered bond since Wednesday of last week (13 January), with issuers having held off amid weak market sentiment at the start of this week and after recent heavy supply. French peer Compagnie de Financement Foncier (CFF) had been expected to issue a 10 year OF benchmark yesterday (Wednesday) after having announced a mandate on Tuesday, but decided to hold off after markets deteriorated.

After European stocks closed 3% lower yesterday, and with an ECB meeting this afternoon, some bankers had said it was unlikely any benchmark covered bond would be priced this week.

However, Crédit Agricole Home Loan SFH announced its deal this morning amid conditions that syndicate officials said were more favourable for issuance, with European equities up 1% at the open, albeit before falling once again, and yields seen as mostly stable since yesterday.

“It was interesting to see that they were ready to move in what is a modestly less bad market than yesterday – you can hardly call it a good market,” said a syndicate official away from the leads. “It looks to have gone very well.”

Leads Crédit Agricole, CaixaBank, HSBC, LBBW, Lloyds, SEB and Société Générale launched the August 2020 obligations de financement de l’habitat (OH) with initial price thoughts of the low 10s over mid-swaps. They then moved to guidance of the 10bp area, plus or minus 1bp, will price within range, on the back of books in excess of Eu1bn.

The spread was then set at 10bp and the size fixed Eu1.5bn on the back of Eu1.8bn of orders. The book closed at Eu1.9bn.

“The issuer went for the shorter maturity to ensure a smooth execution but we still had to be careful about which session to use,” said a syndicate official at one of the leads. “So, after we saw some stability in equities, credit indices and cash bonds this morning, we were confident in pulling the trigger.

“In the end we printed a larger size and built a bigger book than other recent ECB-eligible issues, so we’re very happy with this result.”

Syndicate officials away from the deal agreed that Crédit Agricole’s choice of tenor was the right one.

“The big takeaway from this is that tenor is making a big difference to the executability of deals,” said one. “Crédit Agricole went for a relatively defensive trade here whereas previously they have clearly preferred to issue in the six to eight year bucket.”

The syndicate official noted that Crédit Agricole Home Loan’s last benchmark covered bond with a maturity of five years or shorter was a Eu1.5bn April 2017 issue in March 2012.

“They took a sensible decision to react to the needs of the market and it looks like it has served them very well,” he said. “This is what it’s going to be like.

“We are going to have to monitor each day as it comes and be ready to hit the screens.”

Another syndicate official agreed.

“This was the smartest move they could have made,” he said. “They picked a relatively OK day, issued in the most liquid part of the curve, and offered a generous new issue premium.

“It ticked every box.”

Some syndicate officials at and away from the leads said fair value for the new issue was around 4bp, seeing Crédit Agricole March 2020s and January 2021s quoted at 4bp, bid, and October 2021s at 5bp. Lead syndicate officials also cited BNP Paribas June 2020s and Société Générale February 2020s, both seen at 3bp.

“A new issue premium of 6bp-7bp is roughly in line with what we have seen from some recent Eurozone issues, which were smaller and done in better conditions,” said the lead syndicate official. “That’s a very good outcome.”

Other syndicate officials away from the deal, however, said fair value was closer to flat to mid-swaps, based on Crédit Agricole 2020 and 2021 paper at around flat, mid.

“It looks fairly cheap, but rightly so,” said one syndicate official away from the leads. “Recent deals have mostly come with slimmer premiums, but given market conditions and the uncertainty yesterday this seems like the right price for the day.”

The deal is the widest-priced French benchmark covered bond in the five year part of the curve since before the announcement of CBPP3 in September 2014. CFF priced a Eu1bn March 2019 issue at 16bp over mid-swaps in March 2014, before spreads tightened, into negative territory, when the ECB announced the third covered bond purchase programme.

Another syndicate official said that longer dated issuance, such as CFF’s mandated deal, will likely remain challenging if the market remains volatile.

“CFF’s deal was a different animal,” he said. “If you’re going into the long end you need to be cautious and wait for a relatively solid market.

“I’m not surprised they held off for now and it was the right decision.”

Another syndicate official said that further issuance could not be ruled out tomorrow, however, if this afternoon’s ECB meeting encourages a bounce.

“Fridays are never ideal, but if there’s a period of stability then issuers might well be tempted, because you never know how the market will look next week,” he said.