CRH attracted peak demand above €6bn for a €2bn dual-tranche, eight and 15 year deal today (Tuesday), with the longer-dated tranche in particular defying a downward move in rates in coronavirus-hit markets. SG is set to launch a “positive impact” 10 year tomorrow.

After announcing the mandate for Caisse de Refinancement de l’Habitat (CRH) yesterday (Monday) afternoon, leads Barclays, Crédit Agricole, Credit Suisse, HSBC, LBBW and Natixis opened books for the eight and 15 year tranches with initial guidance of the mid-swaps plus 7bp area and 12bp area, respectively. After just less than an hour they reported a combined order book of over €4bn, excluding joint lead managers and – according to a lead syndicate banker – also the Eurosystem.

The eight year tranche was ultimately sized at €1.25bn and priced at 2bp on the back of books above €3.5bn, while the 15 year was sized at €750m and priced at 6bp on the back of over €2.5bn of orders (both books excluding JLMs). The allocatable order book on the eight year was around €3bn, including €100m JLM interest, and around €2.4bn, including €100m JLM interest, on the 15 year.

“Looking at the book size, it went extremely strongly,” said a syndicate banker at one of the leads.

He saw fair value at around 1.5bp for the eight year and 4bp for the 15 year. Compatriot BPCE SFH sold a €1.25bn long eight year at 5bp and a €1bn 15 year at 9bp on 14 January, following initial guidance of the 9bp area and 13bp area, and according to pre-announcement comparables circulated by CRH’s leads, these had tightened to 3bp and 5bp, respectively.

“The outcome shows a very moderate new issue premium and confident print,” said the lead banker. “This in spite of much less accommodative market conditions than at the time of BPCE’s trade.”

He noted the impact of the coronavirus on financial markets, which contributed to increased volatility in the 15 year swap rate and a fall in rates such that CRH’s 15 year was priced to yield 0.312% compared with 0.529% for BPCE’s.

“We did consider the potential impact of the move in rates on demand, also with CRH being the tightest name from its jurisdiction,” said the lead banker, “but we were convinced the trade would succeed. We didn’t even go out with a cheap starting point, but the same as we would have on any other day.

“If anything, we take this as evidence of CRH’s top quality, which addresses perfectly investors’ concerned with macro and geopolitical risk. I believe the book outcome demonstrates a further broadening of CRH’s investor base with real money accounts and traditional covered bond buyers.”

In spite of the decline in yields, the 15 year was CRH’s first positive-yielding benchmark since its comeback in October, he noted.

Syndicate bankers away from the leads were complementary of the trade.

“The pricing was expected – the same as we had said – so fine,” said one, “while they got an extremely good book. It was a very nice trade.”

He said the amount of cash investors have to put to work in the asset class outweighed the decline in yields.

“If you have a covered bond to sell,” he added, “you will have no problems doing so unless you push too much on pricing.”

A lead syndicate banker said that the Eurosystem order for the new issue was ultimately in line with the 40% of issue size it has bid since the restart of CBPP3 in November.

CRH’s deal was the first euro benchmark this week and since Belfius and DZ issued last Tuesday (21 January).

Société Générale SFH is expected to sell its second “positive impact” covered bond tomorrow (Wednesday), after having today announced a mandate for a 10 year euro benchmark via Crédit Agricole, Danske, LBBW, Rabobank, Santander and UniCredit. Its first such issue, a July 2029, was trading at 1.3bp over mid-swaps, mid, according to pre-announcement comparables circulated by the leads.

In sub-benchmarks, Sparkasse Pforzheim Calw has mandated Erste and LBBW for a €250m no-grow eight year mortgage Pfandbrief for launch in the near future.