A Eu1.25bn long seven year covered bond for Compagnie de Financement Foncier impressed today (Monday), coming 5bp inside initial guidance upon Eu2.25bn of demand, with its success attributed to a recent lack of diverse supply. Banco Desio and RLB Noe-Wien could enter the market tomorrow.

The new CFF issue is the first benchmark covered bond out of France since 3 July, when Crédit Agricole sold a Eu500m long 10 year obligations foncières. The euro covered bond market has been dominated by German issuers since it reopened on 16 August, with just one Danish benchmark – a Eu500m seven year for BRFkredit on 23 August – offering diversity amid the four Pfandbriefe.

Compagnie de Financement Foncier (CFF) leads Barclays, Citi, Deutsche, ING, Natixis and Santander launched the December 2024 issue with guidance of the 3bp area this morning. The leads announced after just over one hour that books had exceeded Eu1bn, and later revised guidance to the flat area.

The spread was then set at minus 2bp and the size at Eu1.25bn on the back of Eu2.25bn of orders from over 90 accounts.

“It’s a really solid post-summer reopening for France,” said a syndicate banker away from the leads. “If you look at recent supply, the 5bp move from initial guidance to re-offer is quite sizeable and a Eu2.25bn book is clearly impressive.

“It shows we are off to a good September start.”

The book is the biggest for a benchmark since 22 June, when Nationwide Building Society attracted over Eu3bn of demand for a Eu1bn 15 year, and tightened pricing some 10bp to a re-offer of 30bp over. The deal is the biggest new euro covered bond since Rabobank included a Eu1.5bn seven year tranche in its Eu2.5bn two-tranche debut on 22 May, although ABN Amro tapped a January 2037 deal for Eu1.25bn on 5 July.

Bankers said that the relatively low supply of benchmark covered bonds since the market’s reopening, and in particular the lack of supply from non-German issuers, would have boosted demand for CFF’s issue.

They added that appetite for high quality, low beta assets may also be stronger this week given heightened geopolitical risk, on the back of North Korea’s nuclear test yesterday (Sunday).

The deal was deemed to have offered a new issue premium of 1bp-2bp, with bankers citing CFF September 2023s at around minus 7bp, mid, September 2024s at around minus 4.5bp, and January 2025s at around minus 1.5bp.

“There is a surprisingly steep curve between the September 2024s and the January 2025s,” said a syndicate banker away from the deal. “The true fair value of the new issue probably lies somewhere in the middle.”

The new issue is CFF’s third benchmark covered bond this year, following a Eu1.5bn long six year in January and a Eu1.5bn long five year in May.

Raiffeisenlandesbank Niederösterreich-Wien (RLB NOe-Wien) announced a mandate this afternoon for a Eu500m no-grow seven year covered bond. A syndicate banker at one of leads BNP Paribas, DZ Bank, LBBW, RBI and UniCredit said the deal could be launched tomorrow, subject to market conditions.

The deal will be the Austrian issuer’s first benchmark covered bond since October 2015.

Syndicate bankers at the leads saw RLB NOe-Wien April 2021s at minus 7.5bp, mid, September 2022s at minus 6bp, and March 2025s at minus 3.5bp.

Banco Desio held an investor meeting in Milan last Thursday ahead of a potential euro benchmark covered bond debut and today announced that the deal could be launched as early as tomorrow. The issuer said it is focussed on a seven year maturity.

Nykredit is also expected to issue its first syndicated euro covered bond this week, having held a roadshow for a Eu500m no-grow long five year (October 2022) FRN last week.