Caisse de Refinancement de l’Habitat (CRH) attracted over €4.5bn of orders to the first new euro benchmark in over two weeks today (Thursday), a €1.25bn seven year transaction that achieved the biggest book, tightest pricing and longest maturity in over a month.

The last new euro benchmark was a €1bn four year from Compagnie de Financement Foncier (CFF) on 6 April, although on 9 April, Bank of Nova Scotia (BNS) tapped a €750m March 2023 issue for €1.25bn.

After announcing the mandate this (Thursday) morning, CRH leads Barclays, Crédit Agricole, LBBW, Natixis and SG went out with guidance of the mid-swaps plus 36bp area for a seven year euro benchmark-sized transaction. After an hour, the leads reported books above €2bn, excluding joint lead manager interest, and after around two hours and 20 minutes, the spread was set at 31bp and the size at €1.25bn on the back of over €3.7bn of orders, including €325m JLM interest, while the final order book was above €4.5bn.

The euro benchmark is the first to extend beyond five years since an Eika Bokligkreditt €500m seven year on 6 March.

“Since the beginning of the week this is the bucket where we’ve seen the most demand in secondary,” said a syndicate banker away from the leads, suggesting this could encourage other issuers to follow CRH in opting for a longer maturity.

Analysts have said that a reopening of longer maturities could help attract banks into issuing euro benchmarks, with shorter maturities less attractive relative to central bank alternatives.

CRH’s deal is the sixth CBPP3-eligible euro benchmark in a row to come from French issuers, following deals from Axa Bank Europe SCF, BPCE SFH, Crédit Agricole Home Loan SFH, Crédit Mutuel Home Loan SFH and CFF since 19 March.

The order book is the biggest on a euro benchmark transaction since February, while CRH was able to tighten its spread during execution more than its peers and price at a level that bankers at and away from the leads said was equivalent to almost no new issue premium.

“We saw fair value in the high 20s to low 30s,” said the banker, “meaning almost no NIP, which is a first for quite some time and even though CRH is the best name out there, it seems we are moving nearer to normal territory for covereds.”

A lead syndicate banker said the achievements of CRH in terms of pricing and demand are a reflection of its standing relative to its compatriots.

“They’ve re-established a longer maturity at an attractive price,” he added. “Today we have certainly seen some safe haven bids in there for that very strong French residential mortgage collateral – it’s as safe as it gets.”

He said that although CRH’s pricing is encouraging, conditions could yet develop such that there is greater differentiation between credits, meaning such euro benchmarks will not be for everyone.

“Whatever the world is going to look like post-corona, we will have names that if anything will rely even more on the ECB,” he said, “and we will have names who are strong like CRH that will continue to be able to fund themselves in the market, even if these funding needs go down.

“There is nothing wrong as a bank going out and funding itself at market terms,” he added. “It’s definitely a stronger signal than just hiding and going to the central bank.”

Another syndicate banker away from the leads agreed that CRH’s execution is a step in the right direction, but said it is not clear whether it will prompt further supply, particularly for the majority of issuers who have cheaper refinancing options available.

“It’s a successful trade, of course, but the pricing’s still not tempting,” he said. “It would imply that a transaction from Germany – assuming a gap between the two jurisdictions of about 10bp – would stand a good chance of surfacing in the low 20s for seven years, and I still can’t think of any German issuer finding this very attractive.”