La Banque Postale priced a Eu500m 10 year covered bond today (Wednesday) that is the tightest non-German 10 year benchmark since October, using momentum provided by over Eu900m of orders to tighten the spread 3bp from guidance to land close to fair value.

La Banque Postale Home Loan SFH leads BNP Paribas, Deutsche Bank, HSBC and UBS launched the Eu500m no-grow 10 year issue with guidance of the 3bp area this morning. Guidance was later revised to the 1bp area on the back of books over Eu875m excluding joint lead manager interest, before the price was set at flat to mid-swaps, with the book last reported at over Eu900m.

“It’s a good result, and definitely looks way stronger than the German Pfandbrief in the market today,” said a syndicate banker away from the leads. “It’s almost twice subscribed and was clearly well sold without relying on the ECB ticket, even with a punchy spread and a small new issue premium.”

The deal is the tightest non-German benchmark covered bond with a maturity of 10 years or longer since October, when Crédit Agricole priced a Eu500m 10 year issue at 7bp through mid-swaps.

It was deemed to have offered a new issue premium of at most 1bp, with some bankers arguing it was priced flat to fair value. They cited La Banque Postale’s January 2025s at around minus 6bp, mid, and Crédit Agricole Home Loan SFH May 2027s – the last 10 year benchmark from France – trading between minus 1bp and flat.

The French issuer’s deal was deemed to have fared better than a Eu500m eight year Pfandbrief for Deutsche Hypothekenbank today (see separate article) in part because it offered substantially more spread for a longer dated deal, with Deutsche Hypo’s trade ultimately priced at minus 10bp.

“Since the French election rally, French names have done well even at what are very tight levels,” said another syndicate banker away from the deal. “People have not been excited by the even tighter German paper in the same way.”

Bankers noted that recent French deals were continuing to perform on the secondary market on the back of the French sovereign’s outperformance versus swaps.

The new issue is La Banque Postale’s second benchmark covered bond of the year, following a Eu500m eight year in January.