Crédit Agricole seized upon a stabilisation in underlying government bonds today (Tuesday) to achieve its size ambitions and sell a Eu1.5bn long seven year OH as others struggled to elicit demand, but some bankers said the spread was still too wide of secondaries and recent supply.

European rates have remained volatile since the US election result last week, and bankers cited substantial movements in yields and government bond spreads as one of the main obstacles to issuance this week, with covered bonds from BBVA yesterday and ANZ today (see separate article) only marginally subscribed.

However, rates were more stable today, and acting upon the supportive start, Crédit Agricole Home Loan SFH leads Crédit Agricole, Bank of Montreal, LBBW, Santander, SEB, and Standard Chartered launched a February 2024 obligations de financement de l’habitat (OH) issue this morning with initial price thoughts of the mid-swaps minus 2bp area.

Guidance was then revised to the minus 4bp area, plus or minus 1bp will price within range, on the back of books around Eu1.5bn, before the spread was fixed at minus 5bp and the size at Eu1.5bn, with books over Eu2bn.

“There’s been a varied array of deals over the last 24 hours, some successful and some not so successful, and we’re happy to be at the right end of that spectrum,” said a syndicate banker at one of the leads. “We’ve seen people struggle this week in terms of moving the price and perhaps also struggling for size.

“Here, the goal from the outset was to print a large deal, and we were able to achieve that while also tightening the spread by 3bp, which is not too shabby given the volatility we’ve seen.”

Bankers saw Crédit Agricole 2022 paper at minus 14bp-13bp, bid, 2023 paper at minus 12bp, and July 2025s at minus 10bp. They said this implied that the initial price thoughts offered a new issue premium of around 10bp – substantially more than recent core supply and roughly the same as the premium paid by a Eu1bn 10 year cédulas for BBVA yesterday. The final premium was said to be around 7bp.

Some bankers away from the deal said this was more generous than necessary, also noting that the deal had been priced 3bp wider than a Eu1bn seven year issue for Nordea Mortgage Bank yesterday (Monday), even though Crédit Agricole’s issuance trades inside Nordea’s euro outstandings.

“I think they’ve paid up a lot for that extra Eu500m,” he said. “You could argue that Crédit Agricole have already taken a lot out of the market this year and so need to pay up a bit more, but I still think this is too generous.”

Crédit Agricole has now sold Eu6.75bn of euro benchmark supply this year, including three previous benchmarks from Crédit Agricole Home Loan SFH and a Eu500m 10 year issued through Crédit Agricole Public Sector SCF on 21 October.

“Even despite that, I’d still have priced this at least flat to Nordea,” said the syndicate banker.

However, the lead syndicate banker said it was appropriate that the new issue was priced wider than Nordea’s given its larger size and longer maturity.

“I don’t really see how anyone can call this cheap considering we took such a big size out of the market and when you’ve got deals that are essentially failing to both get subscribed and to tighten the price,” he added. “In this market, it’s about picking the right windows and achieving your objectives.

“The OAT curve has been very volatile recently, and this was probably the first day since the US elections where there was enough stability to go ahead, so we were keen to get this deal done as quickly as possible.”

The new issue was seen as offering a pick-up of around 10bp versus OATs.

Some bankers at and away from the leads also said that current secondary levels are of only limited use when interpreting fair value for new OF issues, as French spreads are especially squeezed, with some OF having even tightened inside Pfandbriefe through the summer.

“I think everyone acknowledges that a French issuer could not get away with pricing an actual new benchmark at these levels,” said a syndicate banker away from the leads. “The fact they started without size limitations suggested they had size aspirations, so to start fairly generously and leave room to leverage both the size and the spread makes sense – even if you could say they offered too much.”