A CM-CIC EUR1bn 10 year covered bond provided a “reality check” today (Monday) after demand was lower than for a more expensive Caffil 10 year last week, with a lack of secondary performance blamed, though CM-CIC’s EUR1.3bn book was still considered solid.

Leads Barclays, Danske, Deutsche and Nomura launched the new 10 year issue for Crédit Mutuel CIC Home Loan SFH with guidance of the mid-swaps plus 7bp area this morning. After around two hours and 40 minutes, the leads announced books had surpassed EUR1bn.

The spread was later set at 6bp with books over EUR1.25bn, before the size was fixed at EUR1bn with the book closing above EUR1.3bn.

“The book looks solid, and getting EUR1bn probably will have been important for the issuer,” said a syndicate banker away from the leads.

The deal was deemed to have offered a new issue premium of around 6bp versus the issuer’s curve, with syndicate bankers at and away from the leads seeing CM-CIC February 2026s – the issuer’s most recent benchmark, having been priced in January – at minus 5bp, mid, its April 2026s also at minus 5bp, and its September 2027s at minus 1.5bp.

CM-CIC’s approach in offering an elevated new issue premium was in line with that used by many other issuers in recent weeks, said syndicate bankers.

“It is the only way to go,” said one. “If you offer a healthy NIP for a strong name, you will get your deal done.”

On Tuesday Caffil priced a EUR1.5bn 10 year issue at 4bp, offering a premium of as much as 10bp, according to syndicate bankers. The deal was seen trading today at around re-offer. Bankers noted that Caffil’s covered bonds trade slightly tighter than CM-CIC’s across the curve.

Syndicate bankers away from CM-CIC’s leads said the lack of performance in Caffil’s deal – despite it having attracted EUR2bn of orders – could explain the lower demand for CM-CIC’s 10 year even at a higher spread.

“There’s a bit of a reality check here, as we’ve seen that even at these spreads the secondary market isn’t catching fire,” said a syndicate banker that worked on Caffil’s deal. “I don’t see investors rushing to pick up a similar bond a week later after witnessing that even the Caffil deal, which they thought was a no-brainer, hasn’t really performed.

“Caffil probably enjoyed a bit of a first=mover advantage.”

Hypo Oberösterreich announced this afternoon that it has mandated Commerzbank, Erste and LBBW to arrange a European roadshow ahead of a sub-benchmark euro covered bond expected to have a maturity of seven to 10 years. The roadshow will start on 2 May and end on 4 May.

The Austrian bank sold its first public covered bond, a EUR300m seven year issue, in October 2016.