Crédit Agricole built a combined book of over Eu4.25bn for a Eu2.5bn OH today (Wednesday) that comprised planned long eight and 15 year tranches and a surprise 20 year issued off the back of reverse enquiries, making it an exceptional three tranche covered bond benchmark.

The three tranche deal comes after Helaba sold a Eu2bn dual tranche, five and 10 year Pfandbrief on 5 January and after ABN Amro on 4 January issued a Eu2bn 15 year with an unannounced Eu250m 20 year tranche added during execution. It is also Crédit Agricole’s second multi-tranche offering in the last year, following a Eu3.25bn seven and 15 year deal last March that was boosted by a buy-back.

“This kind of crowd-pleasing, multi-tranche deals are becoming an increasingly common sight,” said a syndicate banker. “As Crédit Agricole have demonstrated, they allow you to make as many people happy as possible in one go.

“They mean that in just one day you can get on board both the medium term investors and the longer dated guys, and when demand is as deep as it is today, why not?”

Crédit Agricole Home Loan SFH announced a mandate yesterday (Tuesday) afternoon for a long eight and/or straight 15 year euro benchmark, via leads Crédit Agricole, Commerzbank, Helaba, LBBW, NordLB, Santander and Société Générale.

The obligations de financement de l’habitat (OH) offering was then launched this morning with guidance of the 3bp over mid-swaps area for an April 2025 tranche and 23bp over for a 15 year tranche. Guidance was later revised to the 1bp area for the long eight year and the 21bp area for the 15 year on the back of combined books over Eu3bn, before the spreads were fixed at minus 1bp and 20bp, respectively, and the size of both tranches set at Eu1bn.

The leads then announced an additional 20 year tranche in response to reverse enquiries, initially based on around Eu250m of interest. The 20 year was ultimately priced at 25bp and the size set at Eu500m. The combined book closed at over Eu4.25bn.

“It’s an impressive and quite unusual trade,” said a banker away from the leads. “For the second year running, Crédit Agricole have taken a big size out of the market and it seems to have been a smooth operation.”

The new issue is the largest deal in the euro covered bond market since Crédit Agricole’s dual tranche offering last March.

Bankers said the eight year tranche offered little to no new issue premium, seeing Crédit Agricole Home Loan SFH February 2024s at minus 2bp, bid.

The 15 year tranche was deemed to have offered a concession of around 10bp, with bankers citing Crédit Agricole March 2031s at around 7bp, bid, and ABN Amro January 2032s – the last 15 year benchmark covered bond – at 13bp. They noted that Crédit Agricole’s covered bonds tend to trade a few basis points tighter than those of ABN Amro across the curve.

“It seems the shorter tranche is pretty tight while the 15 year is pretty generous,” said a banker away from the leads. “Optically the concession on the 15 year is high, but you do sometimes have to pay more to get things moving in that part of the market.”

Bankers said it was difficult to calculate fair value for the 20 year tranche given a relative lack of 20 year paper, but saw ABN Amro’s recent January 2037 issue quoted at 20bp, bid – the level at which it was originally priced. They noted that Crédit Agricole’s 20 year had therefore been priced 5bp wider than ABN’s deal, but said the two were not directly comparable given the Eu250m Dutch issue’s sub-benchmark size.

Crédit Agricole Home Loan SFH issued four euro benchmark OHs last year, including the dual-tranche deal in March. Crédit Agricole Public Sector SFH also issued a Eu500m 10 year obligations foncières in October, its first benchmark since 2013.

Crédit Agricole’s new issue is the first euro benchmark covered bond supply since last Wednesday. After a more active start to the month, market activity has in recent days been moderated by the onset of blackout periods for banks across Europe.

“There are a few issuers looking that could announce something in the coming days,” said a syndicate banker, “but most are either in blackout or are pretty laid back and in no hurry.”