Société Générale SFH and DZ Hyp launched new issues to strong receptions today (Monday), their €750m 10 year and €1bn long nine year, respectively, paying minimal new issue premiums, with the French issuer’s peak €3bn-plus book being held up as particularly impressive.

After announcing the mandate this morning, Société Générale SFH leads BBVA, Erste, ING, Mediobanca, Rabobank, RBI and SG went out with guidance of the mid-swaps plus 6bp area for a €750m no-grow 10 year covered bond. After around 45 minutes, books were reported as being over €1.25bn, excluding joint lead manager interest, and after around two hours and five minutes, the guidance was revised to 2bp+/-1bp, WPIR, on the back of over €3bn of demand, including €75m JLM interest. The deal was ultimately priced at 1bp on the back of over €2.4bn of orders good at revised guidance, including €75m JLM interest.

SG’s is the second French benchmark with a 10 year maturity this year, following a €1.5bn Caffil issue two weeks ago that was priced at 3bp and, according to a syndicate banker away from the leads, was this morning trading at 1bp, suggesting fair value for the new issue to be around flat to mid-swaps.

“Driving the 10 year pricing point another 2bp tighter than Caffil is obviously a strong signal,” he added, “so it looks like investors are seeing value in ECB-eligible paper.”

Pre-announcement comparables circulated by the leads put SG’s July 2029s and February 2030s at minus 0.6bp and plus 0.5bp, mid, respectively, and Crédit Agricole and BPCE 2031 paper at 1bp.

The 5bp move from guidance to pricing is the second largest seen on a euro benchmark this year, after KEB Hana, noted another banker away from the leads, which he said in combination with a €3bn-plus peak book was an “amazing” result.

“The good pick-up versus OATs is important and probably meant a bit more domestic demand,” he said, “and it offers those slightly few basis points which makes it an easy decision for bank treasuries to buy it.”

Another banker away from the leads said the scarcity of SG covered bonds also played into the deal’s success. Its last euro benchmark was a €1bn 10 year in January 2020.

After announcing the mandate on Friday, DZ Hyp leads ABN Amro, Commerzbank, DZ, Erste, Helaba and Santander went out with guidance of the mid-swaps plus 4bp area for a long nine year (March 2030) euro benchmark-sized transaction. After around 50 minutes, books were reported as being over €1bn, excluding joint lead manage interest, and after around an hour and 25 minutes, the guidance was revised to 2bp+/-1bp, WPIR, and the issue size was sized at €1bn on the back of over €1.85bn demand, including €185m JLM interest. The deal was ultimately priced at 1bp and the final book good at re-offer was over €2bn, including €235m JLM interest.

The issuer was pleased with the result, according to a lead syndicate banker, the deal achieving DZ Hyp’s aims in respect of both pricing and size.

“€1bn at 1bp was their target,” he said, “so all’s well that ends at well.”

He acknowledged that EU SURE issuance mandated today and expected tomorrow (Tuesday), which had been anticipated last week, played a role in DZ Hyp’s strategy, but argued that both could easily co-exist in the market on the same day.

“They decided to sneak in before,” he said, “but both markets entertain their very respective followers, so assuming you have both on the same day, I can hardly foresee dedicated investors turning to the EU instead.”

A syndicate banker away from the leads nevertheless said the €2bn-plus of demand was impressive in light of the forthcoming SSA supply.

While the appearance of SG’s transaction on screens did come as something of a surprise, it did not impact the result of DZ Hyp’s transaction, said the lead banker.

“This market is deep enough to host two transactions despite being very close to each other both in maturity and spread on the same day,” he said. “The success of both transactions clearly indicates there was room for both.”

Fair value for the new issue was flat to 1bp over mid-swaps, according to syndicate bankers at and away from the leads, implying 1bp or zero new issue premium.

“I would have thought they could have squeezed it to flat,” said the banker away from the leads, “but plus 1bp is probably a good result for them, anyway.”

Given that DZ Hyp is one of the largest and most frequent Pfandbrief issuers, it likely wanted to appear investor friendly, he added.

Another away from the leads said 1bp of new issue premium was understandable given the issuer was aiming for a larger print.

“If you’re going for €1bn, you need to give yourself some options,” he said, “because if you start too tight, you’re not going to get the size, that would be my guess.”