Caffil today (Wednesday) attracted combined orders of almost Eu4bn to a Eu1.75bn dual-tranche, seven and 15 year issue – its largest ever offering – despite pricing at minimal new issue premiums, with demand for French covered bonds seen boosted by recently enhanced value versus OATs.

Caffil’s deal is the second benchmark covered bond offering from France since the first round of the country’s parliamentary election on 23 April. French spreads rallied in the wake of the vote, and Crédit Agricole subsequently reopened the French covered bond market with a Eu1.5bn 10 year OF last Wednesday.

Caisse Française de Financement Local (Caffil) announced a mandate for the dual-tranche public sector obligations foncières offering this morning, and leads Barclays, Crédit Agricole, Citi, Deutsche Bank and Natixis opened books for the seven year tranche with guidance of the flat to mid-swaps area, and the 15 year tranche with guidance of the 25bp area.

The size of the seven year tranche was then set at Eu1bn and guidance revised to minus 3bp plus or minus 2bp, will price within range, on the back of books in excess of Eu1.8bn. The spread was later fixed at minus 5bp, with books in excess of Eu1.9bn.

The size of the 15 year tranche was set at Eu750m and guidance revised to 22bp plus or minus 2bp, will price within range, on the back of books in excess of Eu1.4bn. The spread was then fixed at 20bp, with books in excess of Eu1.9bn.

“The books are very impressive in terms of the combined size and also how well-balanced they are,” said a banker away from the leads. “You don’t always see such strong demand for 15 year trades.”

The seven year issue is the tightest French benchmark covered bond this year, and the tightest since Crédit Agricole Home Loan SFH priced a Eu1.5bn long seven year OH at minus 5bp last November.

Bankers noted that the 15 year tranche was priced at the same level as the last 15 year benchmark from France, a Eu1bn issue for Crédit Agricole Home Loan SFH that was priced at 20bp on 25 January. They said this highlighted the moves in French spreads in the interim, with the Crédit Agricole issue having widened in the run-up to the election before tightening back in to trade at around 16bp, mid, pre-announcement.

“Given the great appetite for French paper right now, it is no surprise that this deal has gone well, but it is nonetheless a very solid trade,” said a syndicate banker away from the leads. “To tighten both tranches by 5bp is quite aggressive, but even at tight absolute spreads, they were still able to leave some premium and pick-up versus the sovereign.”

The seven year tranche was deemed to have offered a new issue premium of 1bp-2bp, with bankers seeing Caffil January 2024s at minus 8bp, mid, and June 2025s at minus 4bp. They also cited Crédit Agricole February 2024s at minus 5bp. The 15 year tranche offered a premium of around 1bp, they said, citing Caffil January 2031s at 13bp and December 2031s at 17bp, as well as the Crédit Agricole February 2032s at 16bp.

Bankers said demand for the deal will have been boosted because both tranches offered a pick-up versus French government bonds. While French covered bonds have outperformed other jurisdictions and tightened by an average of around 4bp since the vote, they have nonetheless gained value versus the sovereign, with OATs tightening far more. A syndicate banker at one of Caffil’s leads said both tranches offered a pick-up in the low teens versus OATs.

Bankers said the deal offered encouragement to other French issuers should any be considering tapping the market ahead of the second round of the country’s presidential election on Sunday.

The transaction is Caffil’s largest offering, following a Eu1.5bn dual-tranche, long six and 15 year issue in January 2016.

Westpac announced yesterday (Tuesday) afternoon that it has mandated BNP Paribas, Credit Suisse and Westpac to arrange a roadshow, starting on Monday and concluding on Thursday of next week, ahead of a potential euro benchmark covered bond or senior unsecured issue.

The Australian bank’s last euro benchmark covered bond came in July 2015, when it issued a Eu1bn six year, and it has since sold two US dollar benchmarks. Its New Zealand subsidiary Westpac NZ sold a Eu1bn five year issue on 30 March.