Caffil issued only the second euro benchmark in two weeks today (Monday), returning just four weeks after its last for a €750m no-grow 15 year priced roughly flat to fair value on the back of €1.75bn of demand, with the lack of supply and subsequent performance of secondaries supporting execution.

After announcing the mandate this (Monday) morning, Caisse Française de Financement Local (Caffil) leads Crédit Agricole, ING, LBBW, Natixis and NatWest went out with guidance of the mid-swaps plus 6bp area for a €750m no-grow 15 year public sector covered bond. After an hour, books were reported as being over €1bn, excluding joint lead manager interest, and after around two hours the spread was set at 2bp on the back of around €1.9bn of orders, including €125m JLM interest. The final book good at re-offer was €1.75bn, including €125m JLM interest.

Being tightened 4bp and quickly more than twice subscribed, the execution was seen as “textbook” by syndicate bankers away from the leads.

“The only surprise is that it is already their second transaction of the year,” said one.

Caffil sold a €1.5bn long 10 year deal four weeks ago, on 11 January, which was priced at 3bp.

Another banker away from the leads suggested strong conditions and an empty market may have prompted the issuer to bring forward a transaction that may well have been scheduled for a later date.

“They are a super-frequent issuer and can be ready at a moment’s notice, so I wouldn’t be surprised,” said the banker.

Since a €750m Société Générale SFH 10 year deal – the most recent French benchmark – and a €1bn DZ Hyp long nine year were launched two weeks ago, on 25 January, the only euro benchmark to have hit the market was a €500m 10 year debut from Argenta Spaarbank last Tuesday. A syndicate banker noted the Belgian trade has performed a little over 2bp since being priced at 3bp over.

“There’s clearly nothing at all wrong with the market,” he added.

Another banker said that capping the size at €750m will have helped demand, and that Caffil might have been able to achieve a tighter level given the size of the order book.

“But they must have had their reasons not to do that,” he added, “be that price sensitivity or perhaps wanting to leave a good impression on investors for the rest of the year.”

Syndicate bankers at and away from the leads put fair value at 2bp-2.5bp, implying zero to a slightly negative new issue premium. Pre-announcement comparables circulated by the leads this morning put Caffil October 2035s and June 2038s at 2bp, and February 2040s at 3bp.

“It was really simple,” said a lead banker, “as at that part of the curve they were trading at 2bp and the 15 year fit nicely into their maturity profile.”

The deal yielded a marginally positive 0.138%, which the lead banker noted is a rarity in today’s market.

“This is obviously nice for some clients,” she said. “However, for other accounts, 15 years is too long, so it’s a bit of a balance – you lose some demand, but gain some elsewhere.

“Given the demand, we could have done more than €750m,” she added, “but we chose to limit it from the beginning.”

Strong treasury demand in the book was slightly surprising, according to the lead banker, with some typically unable to go as long as 15 years.

“It’s nice to see,” she added. “Overall there was a good balance, with most jurisdictions well represented.”

In spite of the favourable conditions and European banks emerging from blackouts as they release results, little covered bond supply is expected this week, although a syndicate banker said at least one mandate announcement could come out later this week.