Société Générale SFH issued a Eu1bn 10 year covered bond today (Thursday) that had an ambitious starting point yet gained strong momentum to attract around Eu1.6bn of orders, despite being the fifth 10 year benchmark from France in a month and pricing well inside those that came before.

Initial guidance of the mid-swaps flat area showed SG was targeting a print inside recent French 10 year supply, bankers said, after BPCE priced a Eu1bn 10.5 year issue at flat yesterday (Wednesday) and following a trio of straight 10 years last month from CM-CIC – also priced at flat – and Caffil and Crédit Mutuel Arkéa, both priced at minus 2bp.

After the initial guidance was announced, bankers away from the leads wondered how SG’s approach would be received, given that BPCE’s deal wider-price was considered to have found limited momentum.

“SG’s are the most expensive French covereds, so it would not be surprising if they try to price significantly tighter than recent deals,” said a syndicate banker away from SG’s leads. “But it will be interesting to see how this works, because while SG is technically tighter than the others they are a bit behind the curve, being one of the last French issuers coming to the market, and it is not inconceivable that they could suffer from that.”

The leads announced that books had exceeded Eu1bn, excluding joint lead manager interest, and guidance was subsequently revised to the minus 3bp area, plus or minus 1bp will price within range, on the back of around Eu1.6bn of orders, including Eu160m joint lead manager interest. The deal was later re-offered at minus 4bp and the size subsequently set at Eu1bn.

“Getting Eu1bn at minus 4bp for a 10 year, and tightening 4bp after finding strong momentum in the book, this clearly went very well,” said a syndicate banker at one of the leads.

The deal is the tightest non-German benchmark covered bond with a maturity of 10 years or longer in almost a year, with Crédit Agricole Public Sector SCF having issued a Eu500m 10 year at 7bp through mid-swaps on 21 October 2016.

The minus 4bp final spread incorporated a new issue premium of 2bp-3bp, according to syndicate bankers at and away from the leads. Société Générale SFH January 2024s were seen at minus 15bp, mid, and June 2025s at minus 12bp. Syndicate bankers at SG’s leads also cited as comparables Crédit Agricole April 2025s at minus 11bp and May 2027s at minus 5bp, and BNP Paribas May 2025s at minus 16bp and January 2027s at minus 12bp.

The recent 2027s for CM-CIC, Caffil and Crédit Mutuel Arkéa were all seen at minus 6bp-5bp today, while the new BPCE April 2028s were trading at minus 1bp.

BBVA, Crédit Agricole, DZ, Nordea, SG and UniCredit were SG’s leads.

BPCE’s Eu1bn April 2028 issue yesterday was priced flat to mid-swaps by leads BNP Paribas, JP Morgan, Natixis, NordLB and UniCredit, after having been launched with guidance of the 2bp over mid-swaps area. Guidance was revised to the flat area on the back of books in excess of Eu1.2bn, excluding joint lead manager interest. The spread was ultimately set at flat with books at Eu1.3bn.

Some bankers away from the deal suggested that the deal’s momentum was limited because the move to revised guidance was too aggressive or because some investors may have been wary of the spread tightening 4bp-5bp – as has been the norm in recent new issues – from what was perceived by some to be a relatively tight starting point.

“They got Eu1bn done at flat, which is fine, but the deal did give the impression that things were slowing down for 10 year covereds after quite heavy supply in that segment, especially from France,” said a syndicate banker away from the leads.

A syndicate banker at one of the leads said their approach to pricing was reasonable, noting that the initial guidance of the 2bp area offered a new issue premium of around 4bp, which he said was in line with previous trades.

“We rapidly crossed Eu1bn in the book, even if the primary market was very busy, with 12 new issues out in the morning,” he added. “Minus 2bp was clearly reasonable given the ultra-low sensitivity and high quality of the book.”

He added that the leads received a further Eu200m of orders in the last 15 minutes before the book closed.

“We ended at Eu1.53bn good at re-offer with 54 investors in,” he said. “I think given the context it’s quite a nice outcome.”

Central banks and official institutions were allocated 52% of the deal, banks 29%, fund and asset managers 10%, and insurance companies and pension funds 9%. Accounts in Germany and Austria took 50%, France 35%, the Benelux 4%, the UK and Ireland 3%, Switzerland 2%, Italy 1.5%, Spain and Portugal 1.5%, and others 3%.