Arkéa Home Loans SFH attracted over €3.8bn of demand to a €1bn long 10 year covered bond today (Tuesday), its biggest deal in nine years, which bankers said maintained the momentum of a blow-out 10 year green covered bond from BPCE a week ago, attracting less demand but pricing 2bp tighter.

After announcing the mandate yesterday (Monday) lunchtime, Crédit Mutuel Arkéa leads ABN Amro, Crédit Agricole, Crédit Mutuel Arkéa, LBBW and Nykredit this morning went out with guidance of the mid-swaps plus 20bp area for an October 2030 euro benchmark-sized transaction. After around 30 minutes, the leads reported books above €2bn, excluding joint lead manager interest, and after around an hour and 50 minutes, the spread was fixed at 15bp and size at €1bn on the back of over €3.9bn of demand, excluding JLM interest.

A syndicate banker away from the leads said it was another highly successful transaction following BPCE SFH’s bumper deal a week ago, which attracted the biggest order book for a euro benchmark in seven years.

“It demonstrates that covered bonds are still going very well,” he said, “with €3.9bn at this spread. It’s quite amazing and I’m very pleased to see that.”

The syndicate banker said Arkéa is not the most obvious of names to command such demand, and that it managed to print €1bn was commendable given how much it typically raises – the deal is understood to be the issuer’s largest covered bond since April 2011.

“The same pattern of low supply and high demand continues on this segment,” he added. “The question now will be to what extent this can last given long dated covered bonds are trading very close to French OATs – even inside for some maturities – so for French investors, it might prove difficult to find arguments for buying covered bonds, despite their being triple-A.”

A lead banker said the transaction further indicated a wealth of demand in the 10 year space after BPCE last week became the first issuer to tap the maturity in 11 weeks.

“It was super-good,” he said, “as this is the biggest order book these guys have had across their covered bonds in the past few years, which tells you something about the shape of the market.

“BPCE was a good indication of where the market really was,” he added, “so we were able to build this trade on the back of it. It was at 12bp this morning, so we based our initial guidance on this and not so much on Arkéa’s secondary curve.”

Based on its own curve, fair value for the new issue was in the context of 17bp, according to the lead banker, who stressed this was largely hypothetical given secondary markets are relatively illiquid.

Pre-announcement comparables circulated by the leads yesterday put Caffil May 2025s and CRH April 2027s at 10bp and 9bp, respectively. Syndicate bankers away from the leads also noted it was difficult to calculate fair value for the trade precisely, but put it anywhere from 15bp-20bp.

“They left out the Arkéa secondaries completely in the comparables,” said one who saw fair value at around 18bp-20bp. “These bonds were trading far wider than what they eventually did today, and it seems they had this in mind from the start.”

A core European name is eyeing up the market for issuance this week, potentially as early as tomorrow (Wednesday), according to two syndicate bankers, but the euro benchmark pipeline appears otherwise empty.

After last Wednesday announcing the mandate for its inaugural sub-benchmark covered bond, Estonia’s LHV Pank on Friday gave further details of a global investor call for midday CET tomorrow (Wednesday).