Caffil, LBBW and TD sold the first euro benchmark covered bonds of the year today (Monday), with LBBW and TD seen as having found good traction, and Caffil having taken a large size out of the market with a dual-tranche deal even if its outcome was otherwise deemed less impressive.

The three deals were launched after the wider markets got off to a soft start on Monday on the back of a poor session in Asia.

“You’ve got to remember that broader markets aren’t looking so great, and each of these deals are going through in a tough, volatile environment,” said a syndicate official. “That being said, these deals have done well.”

LBBW leads Crédit Agricole, ING, LBBW, Lloyds Bank and UniCredit launched the German deal with initial price thoughts of 4bp through mid-swaps, before revising guidance to 6bp through, plus or minus 1bp, on the back of books over Eu1.4bn, and the final spread was set at 7bp through and size at Eu750m.

“This looks to be the most successful deal of the day,” said a syndicate official away from the leads. “It’s almost a twice oversubscribed book and they managed to tighten in by 3bp, so it’s a very good result.”

Syndicate officials at and away from the leads said the deal offered a new issue premium of around 5bp, seeing German Pfandbriefe dated between November 2019 and October 2020 quoted at minus 13bp-12bp, mid.

Caffil leads BNP Paribas, Crédit Agricole, LBBW, Société Générale and UniCredit launched an April 2022 tranche with guidance of the 7bp over mid-swaps area and a 15 year tranche with guidance of the 25bp area. After two hours the leads announced that the combined book was above Eu1.4bn, with guidance unchanged.

The size of the long six year tranche was then set at Eu1bn and the 15 year and Eu500m, with the spreads fixed in the middle of guidance. The final order book size was not disclosed at the time The CBR went to press.

“As long as the order books were oversubscribed in the end, this looks a good trade,” said a syndicate official away from the leads. “I like this dual-tranche project a lot.”

Some syndicate officials away from the leads saw both tranches as offering a new issue premium of 7bp, based on the bid side of the issuer’s curve. Another saw the long six year tranche as offering a new issue premium of around 3bp, seeing Caffil January 2023s at 4bp, mid, and saw fair value for the 15 year tranche at around 19bp, based on an interpolated curve from Caffil October 2028s and January 2035s.

“Both were pretty tight from the start, so I’m not too sceptical about the fact they didn’t tighten the spread, as this deal was more about taking the size,” said the syndicate official. “It was a fair level in the end.”

The syndicate official added that the long six year tranche offered a pick-up of around 20bp over the French sovereign, and the 15 year tranche around 10bp.

“That obviously helped entice domestic buyers into getting involved,” he said.

Another syndicate official said, however, that demand for the two tranches appeared relatively underwhelming.

“Both tranches look decently priced, but apparently not well enough to shake people out of their tree,” he said. “It seems like Caffil may have been somewhat caught in the middle today.

“You have the German paper with a negative spread from LBBW, which people seem to have found massively attractive, and then TD at the other end of the spectrum, offering something juicer.”

Only three euro benchmarks with maturities of 15 years or longer were sold last year, among them a Eu500m 20 year for Caffil in January. The last was a Eu1.5bn 15 year from ABN Amro on 22 September.

Toronto-Dominion leads Barclays, Goldman Sachs, Société Générale and TD launched the euro-denominated five year deal with IPTs of the mid-20s area over mid-swaps, before moving to guidance of the 22bp area and fixing the size at Eu1bn on the back of books over Eu1.25bn. The spread was then set at 20bp.

“This is a lovely trade, in my view,” said a syndicate official away from the leads. “I think this is the right landing place.”

According to levels quoted by syndicate officials away from the leads, the deal offered a new issue premium of around 5bp, with TD June 2020s seen at 15bp over, bid, and April 2022s at 16bp.

“The IPTs seemed a little generous, but that is probably what is needed at the moment,” said another syndicate official away from the leads.

Syndicate officials said further euro covered bond supply is unlikely tomorrow (Wednesday), with Germany and other European countries marking public holidays, but said Thursday represents a good window.