CA Cariparma sold the first benchmark OBG of the year today (Tuesday), taking advantage of the peripheral drought to attract over Eu2.85bn of orders to a Eu1.5bn dual tranche, eight and 12 year offering, even though both were priced at a record spread inside the sovereign of around 100bp.

The deal is the first benchmark Italian covered bond since October, when Crédit Agricole Cariparma (CA Cariparma) sold a dual tranche obbligazioni bancarie garantite (OBG) issue comprising a Eu750m eight year and a Eu750m 15 year. The absence of Italian banks from the market has been attributed to uncertainty following the country’s constitutional referendum and the subsequent resignation of Prime Minister Matteo Renzi in December and wider concerns over the banking sector.

CA Cariparma announced a mandate for the dual tranche offering yesterday (Monday) afternoon, indicating that it would be targeting a combined size of around Eu1.25bn.

Leads Crédit Agricole, Danske, ING, LBBW, Santander, UniCredit launched the eight year tranche this morning with initial price thoughts of the 58bp over mid-swaps area and the 12 year tranche with IPTs of the 70bp area.

After just over an hour and a half, guidance for the eight year tranche was set at 55bp plus or minus 2bp will price within range and guidance for the 12 year tranche at the 67bp area, and the size of both tranches set at Eu750m, on the back of over Eu1.3bn of orders for the eight year and over Eu900m for the 12 year.

The spread of the eight year tranche was ultimately set at 53bp, on the back of over Eu1.75bn of orders, and the spread of the 12 year tranche at 65bp, on the back of over Eu1.1bn of orders.

A syndicate banker at one of the leads said the response for the two tranches was “outstanding”, especially for the longer-dated tranche, which he said could have proven to be more challenging given an ECB meeting on Thursday that prompted a rise in yields at the long end and an expected rate hike from the Federal Reserve tomorrow.

Bankers said the strong demand for the deal, in spite of the challenges faced by the Italian banking sector, could encourage further peripheral supply. CA Cariparma’s new issue is only the second benchmark covered bond from the periphery in 2017, following a Eu1.5bn 10 year issue for Spain’s CaixaBank on 3 January – the first day of primary market activity this year.

“Given all the background noise and the negative context tagged on to Italian banks at the moment, this is exactly the kind of reopener that the OBG market needed,” said a banker away from the deal. “As one of the safest Italian issuers and as a Crédit Agricole subsidiary, Cariparma was probably one of the best names to reopen the segment. It’s probably those strengths that allowed them to print at what is a very impressive spread versus Italy.”

The eight year tranche was priced 96bp inside 2024 BTPs, and the 12 year tranche 102bp inside 2028 BTPs. Syndicate bankers at the leads said this is the furthest inside the sovereign that benchmark OBGs have ever been priced.

Syndicate bankers said the eight year tranche offered a new issue premium of around 4bp, seeing CA Cariparma January 2022s at 35bp, bid, June 2023s at 38bp, and September 2024s at 47bp. They also cited UniCredit’s October 2026s at 49bp, and noted that the April 2025s of the French parent Crédit Agricole were quoted at 5bp.

The 12 year tranche was seen as offering a premium of around 6bp, with Cariparma’s September 2031s at 66bp. Crédit Agricole’s February 2037s were seen at 32bp.

“Compared to the premiums paid by peripherals last year, that’s pretty slim, albeit with a nice pick-up over the parent bank,” said a banker.