SG SFH is set for a dual-tranche deal tomorrow (Tuesday) that includes the longest euro benchmark covered bond since Russia’s invasion of Ukraine, a 12 year, and which should indicate whether the Eurosystem will cuts its CBPP3 order to 20% for May settlements.

Société Générale SFH has mandated BayernLB, CaixaBank, DZ, ING, NatWest, Santander and UniCredit for six and 12 year euro benchmarks.

The deal will be the longest euro benchmark since ING issued a €750m 15 year at 15bp over mid-swaps as part of a two-tranche trade on 10 February.

“This is a bit uncharted territory,” said a syndicate banker at one of SG’s leads, “given that we haven’t seen longer than eight years for some time.”

The last euro benchmark beyond eight years was a €500m 10 year for Crédit Mutuel issued on the eve of Russia’s invasion, on 23 February, at 8bp over as part of a €2bn two-trancher.

“There is some logic to this one,” added the lead banker, “given the level of absolute yields. It will be interesting to see what lessons there are to be learned.”

Along with a planned sub-benchmark for Oberbank (see below) and any other CBPP3-eligible deals that hit the market tomorrow, SG’s transaction will settle next week, thereby providing clarity on whether the Eurosystem will reduce its order further, from 30% to 20%.

Market participants have closely watched the progression of deals at times when CBPP3 orders have been reduced to reflect the changes in the European Central Bank’s Asset Purchase Programme volumes. Most recently, a €1bn five-and-a-half year green covered bond from OP Mortgage Bank on 29 March was the first euro benchmark with an April settlement and as a result the first to face a reduction in the CBPP3 order from 40% to 30%. However, any impact of the lower order on demand or pricing was negligible, as the Finnish issuer successfully got its deal away, and the primary market has remained orderly in the aftermath, according to syndicate bankers.

The cut from 40% to 30% coincided (in terms of settlement date) with the end of new net purchases under the Pandemic Emergency Purchase Programme (PEPP) and the first month of a scheduled three-month phase-out of net new APP buying, with the second step coming at the turn of this month, over the weekend, meaning any deals settling from next Monday onward (2 May) are not seen as being guaranteed to receive the 30% order – although some analysts expect the size to be maintained through this quarter.

“That’s the big question,” said a syndicate banker at another of SG’s leads. “Rumour has it that for deals settling in May the ECB will again change their stance and reduce their primary market activity. – but nothing is certain.

“Another option for them would be to stick at 30% but not let their interest grow with the deal, as they did once before.”

According to pre-announcement comparables circulated by the leads, SG SFH January 2028s were quoted at mid-swaps plus 0.5bp, mid, and its February 2031s at plus 4.2bp.

The planned French benchmark comes after only one euro benchmark hit the market in each of the past two weeks either side of the Easter weekend. €750m and €500m five year deals for Austria’s RLB NÖ-Wien and RLB OÖ were accompanied by sub-benchmark issuance from the country – as only a €300m deal for Finland’s Sp Mortgage Bank last Wednesday prevented a monopoly on supply – and two further Austrian sub-benchmarks are now in the pipeline.

Oberbank is planning a €250m no-grow seven year mortgage covered bond via DZ, Erste and Helaba. Its January 2030s were quoted at minus 9bp, according to pre-announcement comparables circulated by the leads.

Raiffeisen-Landesbank Tirol is planning an inaugural sub-benchmark covered bond. Erste, LBBW, RBI and UniCredit have the mandate for the €300m no-grow five year mortgage covered bond, scheduled for launch after investor calls today and tomorrow.

RLB Tirol’s mandate comes after Hypo Tirol Bank on Thursday issued a €300m no-grow five year issue, rated Aaa, at 10bp over mid-swaps. ABN Amro, DekaBank, Erste and LBBW had gone out with guidance of the 14bp area and built a final book above €800m, including €90m of joint lead manager interest.