CFF sold an almost twice-subscribed Eu1bn 10 year OF today (Monday) that bankers said was priced appropriately wide of German supply despite some French spreads having tightened inside Pfandbriefe through the summer, and a slim pick-up over OATs was not considered an obstacle.

The new issue for Compagnie de Financement Foncier (CFF) is the first benchmark covered bond from France since 14 June, when Caffil sold a Eu1bn nine year. As covered bond spreads ground tighter through the summer on the back of a lack of issuance, some French covered bonds were since July quoted inside German Pfandbriefe for the first time, and market participants debated whether it would be possible for new issues to be priced at these levels.

After announcing a mandate for a 10 year benchmark Obligations Foncier (OF) on Friday afternoon, CFF leads BNP Paribas, Commerzbank, Natixis, Nordea and Santander launched a Eu1bn no-grow deal this morning with guidance of the 2bp through mid-swaps area.

Guidance was then revised to the minus 4bp area, before the spread was fixed at minus 5bp. The book closed at around Eu1.95bn.

“It’s a very decent, solid print,” said a syndicate official away from the leads. “They paid a little more new issue premium than the deals that came before, but only by 1bp-2bp, and I wouldn’t read too much into that.”

Syndicate officials said the deal offered a new issue premium of around 5bp-6bp, seeing CFF January 2025s at minus 16bp, mid, and February 2026s at minus 13bp.

“They started a little cheap, but after communicating that they were going to print at least Eu1bn it makes sense to play it safe and make sure they have the momentum left, rather than risk getting stuck,” said another banker away from the leads.

Bankers noted that the new issue was priced substantially wider than recent 10 year Pfandbriefe, with WL Bank having priced a Eu500m 10 year issue at minus 17bp on 22 August, and Commerzbank a Eu750m December 2026 issue at minus 16bp on 23 August.

“Of course, the size of CFF’s deal makes a big difference, but if, for example, Commerzbank and CFF had both been doing Eu500m no-grows, these two would probably still have come 5bp-7bp apart,” said a syndicate official away from the deal. “That is close to the differential you would normally expect between German and French issuers, irrespective of whether the secondary curves suggest they are twins.

“There were some people questioning whether French issuers would be able to print new deals at those very tight secondary levels, inside their German colleagues. This probably answers that question.”

Bankers added that the new issue was priced only 5bp wider than the French sovereign, but said this did not appear to have had a substantial impact on demand.

Italy’s UBI Banca was also in the market today with a Eu1bn 10 year deal (see separate article) and bankers expect further euro covered bond supply to follow this week. They suggested deals could be frontloaded ahead of an ECB meeting on Thursday, and said any deals are also likely to be longer dated, with all of the eight euro benchmarks sold since the market reopened last month having maturities of at least 10 years.

Natixis Pfandbriefbank is expected to sell a Eu250m Pfandbrief in the coming days, having completed a roadshow last week (see separate article).