Compagnie de Financement Foncier (CFF) opted to hold off launching an expected 10 year OF benchmark today (Wednesday) after a “brutal” open this morning, and bankers away from the deal deemed the move sensible, with the chances of a deal being priced this week now seen as slim.

CFF announced a mandate for the 10 year euro benchmark obligations foncières yesterday (Tuesday) afternoon, with leads Commerzbank, Lloyds, Natixis, Nykredit and UBS.

The deal would have been the first benchmark covered bond since last Wednesday. Syndicate officials cited weak market sentiment at the start of this week, as well as recent heavy supply, as having persuading issuers to hold off, but CFF’s deal was announced on the back of improving conditions after a day of stability in the broader market.

However, European stock markets dropped sharply on the open this morning on the back of a renewed slide in oil prices, with Bund yields also volatile, and CFF and its leads decided not to launch the deal today.

“This is clearly not the market opening we were hoping for, and it is a total reversal of the positive sentiment of yesterday,” said a syndicate official at one of the leads. “We will see what it means for the timing going forward and we will be monitoring the market.”

Syndicate officials away from the leads agreed with the decision to hold off.

“It is clearly the right decision, just look at the market,” said one syndicate official. “With equities down, and this volatility in Bund futures, it is not the right time to do a 10 year deal.

“It is brutal out there.”

Another syndicate official away from the leads suggested that an important factor in the issuer’s decision was that 10 year swap rates were 5bp-7bp lower than yesterday. He said that the new issue would likely have been priced at 15bp-17bp over mid-swaps, having estimated fair value to be around 12bp, seeing CFF January 2025s at 7bp, mid, and more recent February 2023s at 8bp.

“Based on where swaps were when the deal was announced, they would therefore have been looking at pricing this at 1%,” he said. “After this fall in swaps they probably wouldn’t get there, and that would make a big difference to investor demand.”

Another syndicate official away from the leads, while agreeing that the decision to hold off was the right one, questioned the decision to announce the deal yesterday.

“It’s puzzling, because this is a name that doesn’t need marketing, or much notice,” he said. “I don’t see what you gain from announcing the day before in such a choppy market, unless you want to do investor marketing or some recon on tenor.

“You should just go out with the trade on a day you can do it.”

A syndicate official at one of the leads, however, said it had been right to notify investors in advance of the trade. He noted that earlier this month other issuers, including ABN Amro and La Banque Postale, had announced longer dated deals before entering the market.

“For a 10 year project we wanted to give a bit of a warning, and particularly to highlight that two CFF outstandings are coming to redemption, so we wanted to make sure we had investors’ focus,” he said. “There is no harm in waiting, and I have no complaints from investors.

“They have a slot fixed for us, and they are not seeing any reason to complain when the market is this bad. On the contrary, we have had investors telling us that we are right to not go.”

Another lead syndicate official said it is unlikely the deal will be launched tomorrow, with an ECB meeting also seen as interrupting any window for issuance.

“You should never say never, but given today’s volatility and the ECB, it seems highly unlikely the market will do another U-turn tomorrow,” he said. “We will have a look at where we are tomorrow morning.”

He added that it is unlikely any other issues will emerge this week.

“Elsewhere there are a lot of calls and discussions happening, a lot of work behind the scenes, with quite a few issuers monitoring the market,” he said. “If there is some stability there are deals to do, but things do not look easy.

“Sentiment was fragile but positive yesterday, and you can see how quickly that turned.”

A syndicate official away from CFF’s leads said issuers and leads will have to reassess the market each morning while conditions remain volatile.

“If there’s a rebound then issuers will be thinking about it, probably including CFF,” he said. “But we will just have to take it day by day.”