Crédit Agricole Home Loan SFH is tomorrow (Thursday) set to test demand for long-dated French paper for the first time since an underwhelming La Banque Postale 15 year two weeks ago, opting for a short 12 year maturity that promises to offer investors a positive yield amid an easing in supply.

The last French benchmark was a €750m 15 year from La Banque Postale Home Loan SFH on 5 February that attracted a surprisingly modest €1bn-plus of demand and whose pricing was tightened only 2bp from initial guidance, with syndicate bankers suggesting that investor fatigue in the wake of heavy French supply could be to blame. French issuers sold some €8.5bn of mostly long-dated covered bonds in just over three weeks from 14 January to 5 February, but none since then.

Meanwhile, issuance away from the tightest core jurisdictions and in longer maturities has been better received, with positive yields cited as a key ingredient in their success.

A syndicate banker at one of Crédit Agricole’s leads said the November 2031 maturity was chosen by the issuer in order to sit between outstanding March 2031 and February 2032 paper, and further, to give a small buffer to offer a positive yield.

“This is the closest maturity you can get while still achieving a positive yield,” he said. “They’re going for this in order to get into that positive territory, which it is happy to do given its curve is well populated at the long end.”

The French issuer’s last benchmark was a €1.25bn 10 year in November 2019.

According to pre-announcement comparables circulated by the leads, Crédit Agricole Home Loan’s March 2031s and February 2032s were at plus 2bp and 1bp, mid, respectively.

The lead banker suggested La Banque Postale’s €750m 15 year print could have benefited from a two day execution process in order to give more advance notice to the market.

“They’re a smaller issuer than Crédit Agricole,” he said, “and it was the first time they went beyond 10 years. For example, we’ve already got a lot of feedback from investors on this transaction.

“So for LBP and others, it helps to give more notice, particularly when bank treasuries are going to have to get special permissions in place to go beyond 10 years.”

He said the prevailing yield environment can be trying for investors and that this could affect demand for tomorrow’s trade. However, he said that given the deal will be the first in this maturity from France this year and that there has only been one euro benchmark covered bond so far this week – for SR-Boligkreditt on Monday – it should encounter a decent level of demand.

“UniCredit Bank AG did a 12 year at the start of the year and they had a good-sized order book for a tight jurisdiction,” he said, “but obviously the market depth might not be as big as it was in the New Year.

“That said, the euro market has been relatively undersupplied so far this year, so whilst you might want something at a high yield level, this is the what’s on offer.”

ABN Amro, BBVA, Crédit Agricole, Danske, LBBW and SG have the mandate.