The Eurosystem is understood to have not bought a €1bn long six year issue for Caffil in the primary market on Monday, raising fears over whether its typical 20% order would continue, but bankers said subsequent issues received the hoped-for CBPP3 participation.

The Eurosystem has been placing orders for 20% of eligible new issues since the end of June (reduced from 30%), but the anticipated order via the Banque de France, as the national central bank, did not materialise when the SFIL subsidiary’s latest euro benchmark hit the market on Monday morning.

Syndicate bankers struggled to recall the Eurosystem having similarly skipped participating in an eligible new issue during any of its covered bond purchase programmes.

“There was a kind of deviation from what the Banque de France has done so far,” said a syndicate banker. “Across the Eurosystem, the local central banks have been extremely consistent in what they are doing.

“And then on Caffil, out of the blue, they didn’t participate. It’s very difficult to understand why – everyone can have their own opinion.”

Some market participants noted that Caisse Française de Financement Local (Caffil) has been one of the biggest issuers of euro benchmarks from one of the biggest covered bond jurisdictions. The non-covered bond issuance of its parent, SFIL, is also eligible for the Public Sector Purchase Programme (PSPP) part of the European Central Bank’s Asset Purchase Programme (APP).

Responding to an enquiry from The CBR, an ECB spokesperson said the Eurosystem does not comment on reasons for its participation, or lack of participation in specific primary issuances.

“The Eurosystem has full discretion to purchase or refrain from purchasing any covered bonds meeting the CBPP3 eligibility criteria,” he said. “This also applies to primary issuances.”

Issuers and their lead managers do not typically comment on Eurosystem participation in new issues at the behest of the ECB.

In spite of the Eurosystem’s absence, Caffil generated a book of some €1.35bn and was able to price the €1bn February 2029 obligations foncières at 11bp over mid-swaps, 2bp inside the middle of initial guidance and with a new issue premium in line with much recent supply. Central banks were allocated 20% of the new issue, Caffil’s fourth euro benchmark of the year, compared with 32% on a €1bn 12 year in May, 47% on a €1bn six year in April, and 27% on a €500m 20 year in January.

Caffil’s trade was the only new euro benchmark on Monday, and the Eurosystem returned with its anticipated order for subsequent issuance, including a €1bn January 2030 issue for compatriot La Banque Postale, one of three eligible deals on Tuesday, to the relief of many market participants.

“I can confirm that the ECB is still playing,” said a syndicate banker. “That’s crucial information, because we saw the trade where they weren’t involved at all and syndicates were unsure if we could still count on the Bundesbank, Banque de France, etc, but it has turned out to be a one-off.”

Another syndicate banker said the market is also well placed to be able to withstand such disruption.

“It obviously makes our life as dealers more complicated,” he said, “even if, for the time being, it doesn’t look like the covered bond market cannot work without the support of the purchase programme. And we can be very happy about that – if something like this would have happened last year, I can tell you, spreads would have gone through the roof.”