Crédit Agricole Italia launched the tightest ever euro benchmark OBG today (Monday), a €500m 12 year that is the first Italian green covered bond, while BPCE returned for its second dual-tranche trade of the year, in a market where uncertainty has been reflected in smaller books.

After announcing its plans on Friday, Crédit Agricole Italia leads Crédit Agricole CIB, IMI-Intesa, Natixis, UniCredit and RBI went out this morning with guidance of the mid-swaps plus 10bp area for a €500m will-not-grow 12 year inaugural green covered bond. The issue was ultimately priced at 9bp on the back of more than €750m of demand, excluding JLM interest.

A lead syndicate banker highlighted that the new issue, with a spread in the single-digits over mid-swaps, is the tightest ever Italian fixed rate euro benchmark covered bond. He further noted that the pick-up of 7bp over French covered bonds – as implied by BPCE’s 10 and 20 year benchmarks at mid-swaps flat and plus 4bp, respectively, today – was a record low.

“This tight result was an exceptional outcome for the issuer on all-in cost basis,” he said.

The deal is the first green covered bond from Italy, and the lead banker said the green nature of the new issue helped achieve the tight pricing, even if the illiquid secondary OBG market made it difficult to quantify any “greenium”.

Syndicate bankers away from the leads flagged the minimal pricing move and suggested the low level of oversubscription indicated that the universe of investors for such a trade was limited, with one also suggesting the 12 year maturity – “a sort of no man’s land” – was a further limiting factor. Another said the French parentage of the Italian issuer also meant investors might differ in how they value the credit.

The lead banker said that with Crédit Agricole Italia under no pressure to issue and enjoying strong French sponsorship, pricing was prioritised from the outset.

“Indeed, this transaction was not to everyone’s taste,” he said. “We designed a strategy towards competitive pricing, discounting the very liquid and conducive environment for covered bond issuers, in addition to the almost unlimited back-stop bid from the ECB in the secondary market.

“It was €500m will-not-grow for a reason – we wanted to achieve single-digit pricing. Job done.”

BPCE SFH leads ABN Amro, CaixaBank, Commerzbank, Helaba, ING, Natixis, Santander and Swedbank this morning went out with initial price thoughts of the mid-swaps plus 4bp area for a €500m-€750m 10 year tranche and the 7bp area for a €500m-€750m 20 year tranche. After around an hour and 20 minutes, combined books were above €1.5bn, excluding joint lead manager interest. After around two hours and 55 minutes, guidance was revised to 1bp and 5bp, plus or minus 1bp, WPIR, respectively, for two tranches with a maximum size of €1.25bn, on the back of a combined book approaching €2bn, including €200m JLM interest, slightly skewed toward the 10 year. The 10 year and 20 year tranches were ultimately priced at flat to mid-swaps and 4bp and sized at €500m and €750m, respectively, with combined books good at reoffer above €2bn, evenly split, including €200m JLM interest.

The new issue is BPCE’s second dual-tranche trade this year, following a €2bn eight and 15 year trade on 18 January that was almost twice subscribed, and a banker away from the leads said this may offer some explanation as to why demand was “less exciting” today.

“It was OK, but not more than this,” he said.

A lead banker said the drop in oversubscription versus its previous deal is in line with a recent fall in the size of some covered bond books.

“Even if supply has been underwhelming,” she said, “we are not seeing big blowout books these days.”

She said the issuer nevertheless achieved its aim of printing €1.25bn across the two tranches.

“From a pricing perspective, they priced with just 1bp of new issue concession,” she said, “which was in line with their expectations and a very tight level historically for this name.

“But with the volatility in rates, it does feel like some investors are staying sidelined.”

Another banker said the lower book sizes could be attributable to a combination of factors including the ongoing rates uncertainty, anticipation ahead of an ECB governing council meeting on Thursday, and ever-tighter spreads.

“They were OK, but were a little less passionately received than recent transactions,” he said of today’s trades, “so people could be fearing the ECB might say something later this week, but it’s difficult to grasp an exact reason.”

Another said the steepening of curves is helpful to the market as it offers more outright yield, but alternatively it could see investors holding back in expectation that the trend will continue.

Today’s transactions should not be seen as a turning point in a market that has so far this year been “rock solid”, he added, but rather as an indication investors are not chasing every deal at any cost.

Oldenburgische Landesbank AG (OLB) is set to launch a 10 year inaugural euro sub-benchmark mortgage Pfandbrief tomorrow (Tuesday), after today announcing the successful conclusion on Friday of a roadshow.