Crédit Agricole uncovered strong demand for “novel” maturities with a EUR1.5bn, short four year and 20 year OH duo today (Friday), with the 20 year’s EUR1.5bn-plus book deemed a healthy sign, although some were surprised demand for the four year was not higher.

The short four year deal is, excluding deals from Greece, the shortest dated euro benchmark covered bond since July 2017, when HSH Nordbank sold a EUR500m three year. The longer tranche is only the fifth 20 year benchmark covered of the year.

“These are both fairly novel maturities for covered bond investors in euros,” said a syndicate banker away from the leads. “It’s a nice idea, and looking at how the deal went you have to say they picked both tenors well.”

Crédit Agricole Home Loan SFH leads BayernLB, Crédit Agricole, LBBW, Natixis and TD opened books for the deal this morning with guidance of the mid-swaps minus 5bp area for a EUR500m no-grow August 2022 tranche, and guidance of the 15bp area for the 20 year tranche, for which no initial size was set apart from it being a “benchmark”.

After around one hour and 15 minutes, the leads announced that combined books were “well above” EUR1.25bn. Some 35 minutes later, the leads announced that books for the short four year tranche were around EUR1bn and for the 20 year tranche above EUR1.25bn, with guidance unchanged.

The spreads were subsequently fixed at minus 9bp for the EUR500m no-grow short four year tranche, with books around EUR1.2bn, and at 12bp for the 20 year tranche, with books above EUR1.5bn, for a maximum issue size of EUR1bn. The size of the 20 year was later fixed at EUR1bn.

The final books stood at around EUR1bn for the short four year tranche, including over 50 accounts, and above EUR1.5bn for the 20 year tranche, including over 60 accounts.

Bankers said the 20 year tranche looked especially strong.

“There isn’t much material you can buy in euro covered bonds in the 20 year maturity bucket, just a few French and Dutch deals,” said a syndicate banker at one of the leads. “We saw clearly that there is a strong bid for this maturity, especially on the asset manager side with some very significant tickets.

“It’s a good signal that, especially at the long end, there is such strong and healthy demand that there is no need to argue anymore about the covered bond purchase programme – this deal would have worked even without their participation.”

The 20 year tranche was deemed to have paid a premium of around 6bp, with bankers citing Crédit Agricole February 2037s at 5bp.

“It’s a very good result for Crédit Agricole as they didn’t have to pay up very much. It’s a pretty tight trade for the long end.”

The EUR500m short four year tranche was also described as a strong trade by bankers at and away from the leads, who noted that by being twice subscribed the deal had done better than most recent EUR500m covered bond issues.

However, some bankers were surprised that demand was not greater, given the rarity of such short dated paper in the euro covered bond space.

“I expected for a stronger bid on the shorter one,” said a syndicate banker at one of the leads, “given there has been so few deals in this bucket just because rates have been so low – some deals came at negative yields but not many, because investors had other options and many would not buy at those levels.

“It’s a good product for bank treasuries for their LCR portfolios and so on, so I would have expected them to buy it in larger size, but in the end it is still two times subscribed, which is still a good result on balance.”

The short four year tranche was priced with a coupon of 0.05% to yield 0.091%.

Some bankers suggested that demand was not higher because the deal was priced tight to secondaries, pointing to the EUR200m drop in the book during execution as a clear sign of price sensitivity.

Bankers were split on the size of final new issue premium offered by the short four year tranche, some calculating it to be around 1bp and others around 3bp, as they variously cited Crédit Agricole November 2022s at minus 10bp or minus 12bp.

“A 4bp move in one go was probably too much for some investors,” added a banker away from the leads.

Both tranches offered a pick up of over 20bp versus the French sovereign, said bankers.

Credito Emiliano (Credem) has meanwhile mandated Barclays to arrange a non-deal roadshow, starting on 1 October, to reintroduce its covered bond programme. Credem has not issued a euro benchmark covered bond since October 2014.