Unexpectedly modest demand for a €750m 15 year La Banque Postale deal today (Wednesday) surprised bankers, with investor fatigue, notably with long end French supply, deemed a possible cause. In contrast, the pick-up on a Santander benchmark Pfandbrief debut ensured a blow-out.

After announcing the mandate this morning, La Banque Postale Home Loan SFH leads Barclays, BNP Paribas, DZ, Goldman Sachs and NordLB went out with guidance of the mid-swaps plus 9bp area for a euro benchmark-sized 15 year obligation de financement de l’habitat transaction. After around two hours and 20 minutes, books were reported as being over €800m, excluding JLM interest, and after around three hours and 25 minutes the spread was set at 7bp with the leads saying to “expect €750m” on the back of around €900m orders, including €60m JLM interest. The issue size was ultimately set at €750m on the back of orders over €1bn, post-reconciliation.

A syndicate banker at one of the leads said it was the most protracted trade since the start of the year, with it becoming evident after 45 minutes of opening books that it was “not exactly going through the roof”.

“The investor fatigue we ran into came as a surprise to everybody,” he said. “I have no idea why it took us so long to put something meaningful together.”

He suggested that some investors may have felt there had been enough long-dated paper from France already this year – La Banque Postale’s benchmark is the sixth from the country of 10 years or longer – and acknowledged that the Eurosystem order was in this instance helpful towards the final outcome.

“Numbers don’t lie,” he said, “and it’s very easy to work out what size their order most likely would be like, and if you subtract it, you are talking of a different transaction.”

However, he said that in the end the outcome was satisfactory, coming with 2bp of new issue premium, only slightly more than in recent comparable trades, and an order book of decent quality.

“The bond will do well,” he said, “so I think no regrets for those who got involved, but it was far from what we were expecting.”

Syndicate bankers away from the leads highlighted that it was the first of recent long-dated French issues to have intraday execution, and that this could have impacted some buyers’ ability to get lines in place in sufficient time.

“They may have been better advised to have advertised this yesterday,” said one. “I would have thought it would’ve been helpful, especially considering this is their first covered bond issue beyond 10 years.”

He added that the guidance may have been “a little punchy,” and not altogether generous, contributing to reduced momentum from the outset.

“They could’ve had a more conservative starting point to make it more attractive,” he said, “though I don’t believe the landing would have been much different.”

Another syndicate banker away from the leads said the pricing strategy did not seem immediately untoward, especially considering where a Caffil 20 year issue was printed yesterday, at 5bp, though some investors may have considered it tight solely based on extending La Banque Postale’s secondary curve from 10 to 15 years.

“There’s also been quite a lot of French long-dated already,” he said,” so investor fatigue may have played a part, but nevertheless, it’s still a bit of a strange one.”

The lead syndicate banker said there was a slight differential between La Banque Postale and Caffil paper in the secondary market, but not to any compelling degree.

“It’s not so pronounced that it might have led people to expect something significantly wider and cheaper here,” he said.

Syndicate bankers at and away from the leads saw fair value at around 4bp-5bp, implying around 2bp of new issue premium.

After a mandate announcement yesterday (Tuesday), Santander Consumer Bank AG (SCB) leads Citi, HSBC, LBBW, Santander and UniCredit this morning went out with guidance of the mid-swaps plus 13bp area for the €500m no-grow 10 year mortgage Pfandbrief. After around an hour and 15 minutes, books were reported as being over €1bn, excluding JLM interest, and after around an hour and 50 minutes, the guidance was revised to 9bp+/-2bp, WPIR, on the back of €2bn of orders, including €55m JLM interest. The deal was ultimately priced at 7bp on the back of €2.25bn of orders, including €55m JLM interest, pre-reconciliation.

A syndicate banker away from the leads said the deal was “clearly a blow-out”, noting the pick-up it offered versus other German Pfandbrief – the most recent of which in the 10 year maturity was a €750m Helaba deal priced at 1bp over on 15 January.

“It’s Santander Consumer Bank, so we’re not talking Helaba or anything,” he said, “but at the same time it has a German mortgage pool – and it’s triple-A – so it did well.”

The widest German paper towards the 10 year part of the curve among comparables circulated by the leads was a Deutsche Pfandbriefbank (pbb) January 2028 quoted at 4.5bp, mid.

Another syndicate banker away from the leads said that despite a move of 6bp from guidance to pricing, the transaction was well sought after.

“Mildly put, they didn’t do it completely wrong,” he said. “€2bn for a €500m no-grow is of course quite a lot, so congratulations to them.”