Compagnie de Financement Foncier (CFF) attracted Eu1.8bn of demand for a Eu1bn no-grow long eight year benchmark at a near zero new issue premium today (Monday), as the recent strength of the covered bond market showed no signs of abating.

The September 2024 benchmark is CFF’s third in euros this year, following a Eu1bn 10 year at 25bp over mid-swaps on 22 January and a Eu1bn six year at 15bp over on 16 March.

The six year was this morning quoted at 6bp-7bp over, mid, according to a syndicate banker at one of the new issue’s leads, reflecting the tightening of the market over recent weeks. Bankers also said that a negligible new issue premium highlighted the strength of the asset class.

“The market has come quite a way since mid-February,” said one. “And the idea of new issue premiums has more or less disappeared when it comes to Eurozone issuance – even Toronto-Dominion came without one last week.

“We were talking of premiums 5bp or higher only a few weeks ago, but the market hasn’t looked back.”

A syndicate official at one of CFF’s leads said that the 9bp re-offer level of today’s deal compared with a bid level of 8bp for its May 2024s, implying a new issue premium of almost zero taking into account half a year’s worth of curve. Another lead syndicate banker put the new issue premium based on mid levels at 4bp, quoting the May 2024s at 6bp, mid, and CFF’s January 2025s at 4bp.

After at the end of last week making provisional plans for the new issue, leads Crédit Agricole, Danske Bank, DZ Bank, Natixis and UniCredit this morning went out with initial guidance of the 12bp area, before revising guidance to the 10bp area, plus or minus 1bp, on the back of Eu1.4bn of orders, including Eu120m of joint lead manager interest. The re-offer was then set at 9bp and books closed above Eu1.8bn pre-reconciliation.

“It was a great deal,” said a syndicate official away from the leads. “At the moment everything still works, whether it’s a standard maturity or more off-the-run.

“They got very healthy demand with a minimal new issue premium.”

Covered bond bankers said that they expect to see more supply this week, even if blackouts are likely to prevent many issuers from taking advantage of the benign market conditions, with the public pipeline also thin.

“We have a similar tone to last week,” said one. “We still have the dynamic of limited supply and strong demand resulting in the higher levels of oversubscription.

“It expect things to be slightly quieter and steadier because of the blackouts, but would be surprised if there is not more this week.”

Turkey’s VakifBank could soon launch the first euro benchmark covered bond from the country after having completed a roadshow, although a banker at one of its leads said that it remained to be seen how soon investors would complete their preparations and whether a deal would emerge this week.