Société Générale SFH attracted over Eu1.5bn of orders to a Eu750m seven year covered bond today (Wednesday) and some bankers were particularly impressed by a 3bp tightening of the spread given the absolute tight levels at which the issuer’s deals are trading, but the appropriateness of the eventual premium was debated.

SG SFH leads Crédit Agricole, Commerzbank, Danske, Lloyds, Société Générale and Swedbank launched the Eu750m no-grow obligations de financement de l’habitat with guidance of the flat to mid-swaps area this morning, announcing just under 20 minutes later that the books had exceeded Eu1bn.

Guidance was later revised to minus 2bp plus or minus 1bp will price within range, on the back of over Eu1.5bn of orders. The deal was then re-offered at minus 3bp with the book closing at over Eu1.5bn, pre-reconciliation.

“It’s a very good result from our perspective,” said a syndicate banker at one of the leads. “It was over twice subscribed and we tightened the price by 3bp – which is currently the norm in this market but we feel is still an achievement given the absolute spreads in French covereds.

“We’re particularly happy with the distribution, with a lot of high quality orders in the book.”

Bankers away from the deal agreed that it had gone well.

“SG’s deal is the better story in the covered bond market today,” said one. “You can be very pleased with a Eu1.5bn book for a Eu750m trade.

“It seems they had no difficulties in tightening the spread by a good amount, and it was a quick, textbook transaction.”

Some bankers away from the deal suggested that the initial guidance was more generous than was necessary when compared to the pricing of recent, larger deals from other French issuers, given the limited size of SG’s deal and the relative scarcity of the issuer.

Last Thursday, Compagnie de Financement Foncier issued a Eu1.5bn long six year covered bond, pricing the deal at 5bp over mid-swaps and attracting over Eu1.9bn of orders. The December 2023 deal was seen as offering a new issue premium of 3bp-5bp.

SG’s new seven year issue offered a new issue premium of around 3bp, according to bankers at and away from the deal, who cited SG April 2024s at minus 7bp, mid, and the issuer’s 2022-2023 paper at minus 8bp.

Other bankers, including the lead syndicate official, said the size of SG’s concession was justified however, given the spread differential between the issuers.

“In the French context there is a clear tiering in the secondary market, with Caffil, CFF, and then SG trading at different levels,” said the lead syndicate official. “Optically, the premium on this new issue was relatively generous, but that is something we felt we needed to have because of the outright tight number that SG’s curve dictates at the moment.

“With that in mind, we wanted to incorporate both that indicated price and scarcity value of SG and limited size of the deal. We feel this level is fair.”

The deal is Société Générale SFH’s first benchmark covered bond since last January, when it sold a Eu750m seven year issue.