BPCE sold a twice-subscribed Eu750m seven year covered bond today (Friday), finding a new clearing level to overcome French election jitters and rates volatility by offering a 4bp-5bp concession and pricing back of OATs. But after Eu8.65bn of supply this year, French supply should slow.

BPCE SFH’s deal is the first new French benchmark covered bond since Tuesday of last week (31 January) when a CM-CIC issue was hit by elevated volatility in French government bonds exacerbated by uncertainty over the outcome of its upcoming presidential election.

BPCE SFH leads Deka, Natixis, Nordea, Santander and Société Générale launched the Eu750m no-grow seven year issue with guidance of the 8bp over mid-swaps area this morning. The spread was fixed at 6bp with the book above Eu1.2bn, before the book closed approaching Eu1.4bn with 67 accounts.

“Most of all it is good that we have found a new clearing level for French covereds, after CM-CIC, which was struggling a little bit,” said a banker away from the leads. “It is good to see a new French deal go well and to see at what price it went well.”

Fellow French issuer Crédit Mutuel-CIC Home Loan SFH lowered its target in the face of underwhelming demand when printing its Eu750m eight year deal last week, having initially aimed for a Eu1bn trade. The deal was priced at 3bp, down from initial guidance of 3bp-4bp, on the back of Eu1bn of orders. Bankers said BPCE fared better – like a Eu400m tap of a Crédit Agricole 20 year on Monday – because of its more attractive spread.

“Overall this is a fair price, versus secondaries and versus the sovereign,” added the banker.

Bankers at and away from the leads said the deal offered a new issue premium of 4bp-5bp based on BPCE’s own secondary curve, seeing its February 2023s at around 1bp, bid, and November 2023s at around 2bp. They noted that the final spread of 6bp represents a pick-up versus OATs, albeit slim, of 2bp-3bp, while CM-CIC’s deal came 5bp inside the sovereign.

The deal also offered a substantial pick-up versus the other seven year French benchmark covered bond to be sold this year, a Eu750m issue for Société Générale SFH on 11 January. SG’s deal was priced at 3bp through mid-swaps, and seen trading at minus 4bp, bid, this morning. Bankers noted that BPCE trades around 10bp wider than SG in some parts of the curve.

Including BPCE’s deal, Eu8.65bn of benchmark covered bonds have been issued out of France this year, approaching half of total supply in 2016 (Eu20.85bn). Only a few of the active French issuers are yet to tap the market this year, including less frequent names such BNP Paribas and Crédit Mutuel Arkéa.

“There aren’t too many candidates from France,” said a syndicate banker, “but if there are any with deals still to do, they might be well advised to go sooner, given the potential for things to get worse nearer the election.”