Axa Bank Europe SCF issued the first euro benchmark beyond 10 years in over three months today (Thursday), a €500m no-grow 20 year that attracted less demand than recent supply and paid a higher new issue premium, but whose success was seen as demonstrating that almost anything goes.

After announcing the mandate for a €500m no-grow long-dated covered bond yesterday (Wednesday), leads BNP Paribas, Commerzbank, ING and Natixis opened books this morning (Thursday) for a 20 year transaction at the mid-swaps plus 28bp area. After around 45 minutes, books were reported as being over €1bn, and after around two hours and 15 minutes, guidance was revised to 25bp+/-1bp, WPIR, on the back of over €1.3bn of demand. The deal was ultimately priced at 24bp on the back of over €1.3bn of orders.

BPCE reopened the 10 year maturity on Tuesday of last week (19 May) with a blow-out €1.25bn trade, but the market had not witnessed a euro benchmark beyond the 10 year maturity since before the Covid-19 pandemic struck financial markets: La Banque Postale sold a €750m 15 year on 5 February, a day after Caffil issued the last 20 year, a €750m deal at 7bp over mid-swaps on 4 February.

Axa Bank Europe SCF itself tapped a €500m April 2033 issue for €250m on Monday of last week (18 May) at 23bp over mid-swaps.

Syndicate bankers away from the leads said the reception enjoyed by today’s 20 year deal showed the market to be open beyond 10 years.

“If one was lacking comfort beyond the longer end, this gives another proof of concept,” said one. “You can put 15, 20 on the table, and there are buyers around.”

Axa Bank Europe SCF’s €1.3bn book was smaller than the multi-billion euro books of the past several euro benchmarks, and its new issue premium higher, but syndicate bankers at and away from the leads said this was natural given the more limited investor base for such long dated paper.

“They just did a tap of their old 15 year so they knew there was good appetite there,” said another syndicate banker, “and this is evidence that you can literally issue anything right now.

“It’s a 20 year,” he added, “which is a bit of an odd maturity, but the €1.3bn book is decent and assuming the ECB is there for €200m, it’s still €1.1bn of appetite from private investors.”

He put fair value at around 18bp, based on Axa 2033 paper at 14bp, implying some 6bp of new issue premium.

“That’s rather elevated compared with what we see for more blue chip names issuing in the belly of the curve,” he added, “but 24bp is nevertheless a nice lift for them.”

Another syndicate banker away from the leads put the new issue premium at 2bp-3bp, based on its April 2033s and Axa Home Loan SFH October 2029s trading at around 12bp.

“The curve appears fairly flat on the covered bond side compared to the govvie curve” he said. “French OATs are quite steep – we have a difference of 15bp between the 10 and the 20 year OAT – so I think that’s why they started at the wider end today, at 28bp.”

While the maturity is “certainly not for everyone”, the syndicate banker said it was nonetheless a very good result for the issuer.

A lead syndicate banker said Axa Bank Europe SCF had achieved a solid result, particularly considering that a 20 year is “not the easiest” of tenors.

“It’s the issuer’s final covered of the year,” he added, “and they wanted to do something longer as it fitted their profile and their internal needs much better, and sufficient feedback received yesterday gave us comfort to push a 20 year.”

The issuer’s last new euro benchmark was a €500m four and a half year on 19 March.

The lead banker saw fair value at around 18bp-20bp based on where Caffil’s 20 year from February was trading and Axa’s curve.

“So in the end they paid about 4bp-5bp of new issue premium,” he said, “which for a 20 year and this name is not bad at all.”