CFF sold a delayed Eu1bn 10 year OF today (Friday) that bankers said was a decent result given the challenge of tapping the long end, while BNP Paribas impressed with a tightly priced Eu750m long five year, after markets reacted positively to signals of further QE from the ECB yesterday.

Compagnie de Financement Foncier (CFF) had been expected to launch its 10 year benchmark on Wednesday after having announced a mandate on Tuesday, but decided to hold off after markets deteriorated.

In more stable conditions yesterday (Thursday), Crédit Agricole then launched a Eu1.5bn long four year obligations de financement de l’habitat (OH) issue, attracting Eu1.9bn of orders. Syndicate officials said issuance conditions further improved after markets reacted positively to ECB president Mario Draghi comments yesterday that raised expectations of additional quantitative easing and/or a cut to the ECB’s deposit rate in March.

“It was a more friendly market this morning,” said a syndicate official.

CFF leads Commerzbank, Lloyds, Natixis, Nykredit and UBS launched the deal this morning with a Eu500m minimum size and initial price thoughts of the mid-20s over mid-swaps, before issuing guidance of the 25bp area on the back of books over Eu750m. The deal was then re-offered at 25bp and the size set at Eu1bn, with the book closing at over Eu1bn.

“It looks like they found it challenging,” said a syndicate official away from the leads. “There was no real change in the guidance, the books are fine, though not as overwhelming as BNP’s or Crédit Agricole’s, and they paid up to get it done, but all things considered this is an OK trade.”

Syndicate officials away from the leads said fair value for the new issue was around 15bp, seeing CFF 2024 and 2025 paper at around 12bp-13bp, bid.

“But that it is not surprising, and it is appropriate really that they have paid up given how things have gone this week,” said one.

The syndicate official added that ABN Amro was also deemed to have paid a premium of around 10bp for a Eu1.25bn 10 year priced in better conditions on 7 January.

Syndicate officials said the reason for CFF’s relatively modest result was the deal’s maturity, noting that shorter-dated paper had been better received in recent weeks.

A syndicate official away from CFF’s leads had suggested that an important factor in the issuer’s decision to not enter the market on Wednesday was that 10 year swap rates fell by 5bp-7bp on Wednesday, meaning the deal would have been unlikely to be priced with a 1% coupon.

Another syndicate official away from the deal noted that 10 year swap rates were up 3bp to 80bp today, after having remained stable on Thursday.

“But instead I am looking at the drop of some 20bp we have seen since the start of the year,” he said. “That means a lot of the usual buyers of longer dated bonds are probably on standby right now, so these deals are difficult.”

Syndicate officials away from the leads said, however, that the issuer and its leads had made the right decision in launching the deal today.

“I think it is right to use the market while it is there,” said one. “Right now you don’t know where we’ll be on Monday, so if the market is possible then why not?”

Another syndicate official agreed.

“It is probably better for them to get the deal done than to wait any longer,” he said. “I would have done the same.”

BNP Paribas Home Loan SFH leads BNP Paribas, Crédit Agricole, NordLB, Nykredit, Swedbank and SEB launched the September 2021 OH with initial price thoughts of the 10bp over mid-swaps area, before moving to guidance of the 8bp area after having taken orders of over Eu1.5bn. The deal was then re-offered at 6bp, before the final size was set at Eu750m.

“While CFF has proved that 10 years are tough, BNP has proved that the big demand and the price power is in the short-to-mid part of the curve at the moment,” said a syndicate official away from the leads. “This is a good quality name and in the belly of the curve, which is what investors like in these risk-off times, so it is not surprising it has worked well.”

Syndicate officials said that the final spread in particular looked impressive compared with Crédit Agricole’s long four year issue, which was priced at 10bp, albeit for a Eu1.5bn size.

“It’s interesting that they went for the Eu750m size in the end, because with those books you’d think Eu1bn or even Eu1.25bn was on the table,” said one syndicate official. “Perhaps there was some price sensitivity in the book.”

Syndicate officials noted that the deal was launched relatively late, at around 10:15 CET.

“It is surprising to see an issuer going so late,” said one. “But it has gone quickly and gone well.

Syndicate officials said that if market conditions remain stable on Monday, and that if no new negative headlines impact sentiment over the weekend, that they are optimistic about the prospects of further covered bond supply next week.

“A lot of issuers have been watching and waiting,” said one. “If markets are as they are next week, I think that will prompt quite a few to get involved.”