Société Générale SFH issued the first French green covered bond today (Monday), although bankers said the market as much as the deal’s “positive impact” drove its strong performance. DZ Hyp is due with more euro 10s tomorrow, while TD was also in the market today, with a three year dollar.

Plans for SG SFH’s inaugural green covered bond were announced last Monday (1 July), with a roadshow following from Wednesday.

Like a handful of other green covered bonds, the proceeds of the French bank’s issue are earmarked for the 15% lowest carbon properties in the country. However, the deal is dubbed a “positive impact” covered bond by SG, in line with previous unsecured issuance off a framework that highlights alignment with the SDGs and other initiatives.

“The framework was already quite known to investors,” said a syndicate banker at one of the leads, “and the roadshow added to that. It has all the green stamps and as long as the company has a sufficiently acceptable ESG strategy – as SG does – you can call it what you want.”

After completing its roadshow, SG on Friday teed up its debut by announcing plans for a 10 year euro benchmark, to be launched as early as today, while compatriot Crédit Mutuel Arkéa was issuing a EUR500m no-grow 10 year benchmark. That attracted over EUR2bn of orders, allowing for pricing of 6bp, which was deemed at or even through fair value, in what was seen as a surprisingly strong result.

“On the back of Arkéa, we knew there would be demand,” said the lead banker on SG’s deal. “Add to that the fact that this is also a green bond, and it is absolutely the sort of trade we knew would go well.”

This morning, leads ABN Amro, Commerzbank, Danske, ING, SG and UniCredit opened books with guidance of the mid-swaps plus 8bp area for a euro benchmark-sized 10 year. The books were above EUR1.5bn after around an hour and three quarters, and after close to three hours guidance was revised to 5bp+/-1bp, WPIR, on the back of more than EUR2.3bn of demand. The deal was ultimately priced at 4bp over and sized at EUR1bn on the back of close to EUR2.5bn of orders good at re-offer, including EUR70m joint lead manager interest.

SG SFH’s outstanding January 2028 was quoted at 2.5bp, mid, according to pre-announcement comparables circulated by the leads this morning, and bankers at and away from the leads said the new issue came either slightly above, flat to, or below fair value, depending on how much they felt the curve extension was worth, and where exactly they saw the January 2028s.

However, they were unanimous in considering the outcome a strong result – even if the lead banker acknowledged that the green element may have made little difference to this.

“When markets are as strong as they are today, you can do pretty much anything,” he said. “But it maybe was a bit of a help in giving us some additional firepower to be as aggressive as we were with the pricing – and it never works against you.”

A syndicate banker away from the leads said that, in their scramble to invest in such positive yielding covered bonds, investors were “forgetting their manners” and paying scant attention to relative value.

A desire to offer investors a “clear cut” positive yield contributed to DZ Hyp choosing the 10 year maturity for a euro benchmark mortgage Pfandbrief that is expected to hit the market tomorrow via BNP Paribas, DZ, Helaba, ING, TD and UniCredit.

A lead banker said that when discussing the prospective deal, it was quickly agreed that a maturity offering an unequivocally positive or negative yield would be best, implying something of 10 years or longer, or seven years or shorter, “given that the borderline is hovering somewhere between eight and nine years”. He added that something longer than 10 years did not suit the issuer.

DZ Hyp’s last benchmark was a EUR500m 15 year on 10 April and it sold a EUR750m 10 year in January. The latter, January 2029 trade was quoted at minus 2bp, mid, according to pre-announcement comparables circulated by the leads, and DZ Hyp January 2030s at minus 1bp, with the 15 year trade quoted at plus 1bp.

Toronto-Dominion Bank was in the market today with a three year US dollar benchmark, with leads BMO, Citi, ING, NAB and TD going out with initial guidance of the 30bp over mid-swaps area. This compared with a final spread of 29bp for the last Canadian three year dollar benchmark, a $1.75bn Bank of Montreal issue on 12 June.

A banker away from the leads said that, with tighter initial guidance than BMO’s 33bp area, he expected TD to be targeting a final spread of 27bp-28bp over, which he said would be an appropriate differential.

The dollar issue follows a £1bn three year FRN from TD on 17 June, and the banker noted that – particularly having already issued in euros this year – the Canadian bank appeared in its covered bond issuance to be steering away from the “fundamentally challenging” negative-yielding short end in euros. He said a re-offer spread of 28bp over for the new three year dollar would be equivalent to minus 2bp in euros, “which is certainty tighter than they’d be able to achieve”.