BPCE SFH attracted the biggest book of the year to the biggest deal so far this year today (Monday), a dual-tranche, €2bn eight and 15 year trade priced around flat to fair value, and syndicate bankers expect a trio of euro benchmarks to hit the market tomorrow.

After announcing the mandate on Friday, leads Crédit Agricole, Danske, DZ, Erste, Natixis, NordLB, Nykredit and UniCredit this morning went out with guidance of the mid-swaps plus 5bp area for the eight year tranche and the 9bp area for the 15 year, with each tranche to be benchmark-sized. After around three-quarters of an hour, combined books were above €2bn, and after two hours guidance was revised to 3bp and 6bp, plus or minus 1bp, WPIR, respectively, for two €1bn tranches on the back of books above €1.9bn and €1.85bn. The eight and 15 year tranches were ultimately priced at 2bp and 5bp.

Bankers at and away from the leads put fair value for the eight year at 1.5bp-2bp over and the 15 year at around 4bp, implying limited new issue premiums.

“From the issuer’s perspective, €1bn in each tranche and plus 2bp and plus 5bp were what they were aiming for,” said a syndicate banker at one of the leads, “so it seemed it ticked all their boxes and marks a good start for them in 2021.”

BPCE kicked off its issuance last year with a similarly structured eight and 15 year deal on 14 January 2020, albeit a larger shorter tranche, of €1.25bn.

A syndicate banker away from the leads said the new issue appeared “very strong”.

“In particular, the long dated tranche,” he added, “which maybe looked more attractive from a relative value perspective.”

Another lead banker acknowledged this, saying that even though curves are very flat, it was felt appropriate to show more of a pick-up for the longer tranche in the primary market. However, he noted that the tightening of 4bp versus 3bp for the eight year ultimately reduced the differential.

Recent trades – particularly a Caffil €1.5bn 10 year last Monday (11 January) and a UniCredit HVB €500m 15 year on Wednesday – had demonstrated the strength of the market, he said, with central banks and official institutions and bank treasuries more focused on the intermediate part of the curve, and asset managers the longer end.

The first lead banker said there was little price sensitivity in the book, in spite of the negligible new issue premiums and yields on offer of minus 0.297% on the eight year and plus 0.026% on the 15 year.

“If it’s not a negative NIP,” he added, “investors are willing to swallow that as a decent outcome.”

The other lead said the underlying strength of the market thanks to technical factors gave them the confidence to announce the mandate before the weekend.

Three new euro benchmarks could hit the market tomorrow (Tuesday), with new mandates for Berlin Hyp and Sparebanken Sør Boligkreditt announced today and KEB Hana Bank expected to launch its debut.

The Korean issuer has finished investor calls and bankers said it could hit the market as early as tomorrow. BNP Paribas, Citi, Crédit Agricole, JP Morgan and Société Générale have the mandate for the euro benchmark-sized five year social bond.

Sparebanken Sør Boligkreditt is due with a €500m no-grow seven year covered bond via Commerzbank, Danske, LBBW, SEB and UniCredit. And Berlin Hyp has mandated ABN Amro, Barclays, BayernLB, Crédit Agricole and DZ for a €500m no-grow 10 year mortgage Pfandbrief.

Bankers said that although the two German trades this year – a €500m seven year for Aareal on 5 January and a €500m 20 year for MünchenerHyp on Friday – have been successful, their position at the tight end of the market is resulting in greater price sensitivity for Pfandbriefe.

“German trades are a bit of a particular animal as they are still deemed the richest kid on the block,” said one.

Another said this has led to a two-speed market.

“German Pfandbriefe are not boasting such large oversubscription levels as DNB and Jyske, for example,” he added. “It will be interesting to see what this means for Berlin Hyp.”

According to comparables circulated by the leads, Berlin Hyp July 2028s were quoted at minus 1bp, mid, May 2029s at minus 1.5bp, and September 2030s at minus 2bp. A lead banker noted that the green nature of much of Berlin Hyp’s outstandings further complicated the picture, with its curve consequently marked tighter.

Landesbank Berlin meanwhile sold a €250m no-grow 10 year mortgage Pfandbrief at 1bp over mid-swaps today via DekaBank and Helaba.