Caffil provided an unexpectedly positive end to the week with a €1bn seven year covered bond today (Friday), as the longer-dated trade achieved stronger demand and a lower NIP than some had anticipated, while two social deals have been mandated, including the longest euro benchmark of 2023.

The French issuer’s trade came after a one-day hiatus in euro benchmark issuance and, unusually, on a Friday. However, bankers at and away from the leads noted that it did not appear to have suffered any ill effects from coming on the last day of the working week.

Leads Barclays, Crédit Agricole, NordLB, SG and UniCredit opened books for the January 2030 euro benchmark public sector obligations foncières with initial guidance of the mid-swaps plus 27bp area. After around an hour and 10 minutes, they reported books above €1bn, and after around two hours, set the size at €1bn and spread at 24bp on the back of books above €1.5bn, including €75m of joint lead manager interest.

“This went better than I would have thought,” said a syndicate banker away from the leads. “They started rather punchily in terms of spread, but evidently lost rather little in spite of a bold spread move, with only €100m or so apparently dropping.”

With fair value seen around 19bp-20bp, bankers at and away from the leads put the starting concession at 7bp-8bp and new issue premium at 4bp-5bp.

“Eight basis points has been the landing rather than the starting premium for seven years and beyond,” said the syndicate banker, “so for a name that comes quite often in the market, this caught me by surprise.

“Definitely one of the more encouraging signs when it comes to long-dated transactions.”

A lead banker said a combination of factors contributed to execution on a Friday.

“We knew there is going to be more supply – LBP has mandated in the meantime and there’s DKB as well – plus you have the EU next week,” he said. “Then it’s the end of the month, and people want to settle before the end of January in regards to the ECB order.

“And there is no problem whatsoever in coming on a Friday – as proven today.”

Another banker away from the leads said Caffil’s new issue premium was at the very low end of what he would have considered necessary, and noted that the execution compared favourably to a €1bn seven year for Finland’s OP Mortgage Bank on Wednesday. The Finnish deal attracted some €1.25bn of orders and although pricing was tightened from 21bp area guidance to 20bp, it did not achieve 19bp – which had been left on the table when guidance was revised to 20bp+/-1bp – and the ultimate new issue premium was seen at around 9bp.

By contrast, a €1bn short three year (September 2025) mortgage Pfandbrief for Münchener Hypothekenbank on Wednesday attracted a final order book above €3.45bn, including €165m of JLM interest, in around an hour and a half, allowing the German to price at minus 9bp and achieve a negative new issue premium, which a lead banker put at minus 1bp but others said was as much as 4bp.

The lead banker described the trade as a blow-out, with the deal attracting some 135 orders from 15 countries. Three-quarters of the paper was placed domestically and a quarter outside Germany.

A banker away from the leads said it reaffirmed that the short end is the sweet-spot.

“Three years and shorter is selling like hot-cakes,” he said. “It’s fairly self-explanatory, with three years yielding 3% and 10 year around 28bp lower.”

Deutsche Kreditbank (DKB) is set to test appetite beyond 10 years with the longest-dated euro benchmark yet this year, a €500m no-grow 12 year social housing covered bond. ABN Amro, BayernLB, Commerzbank, Crédit Agricole, NordLB and UniCredit have the mandate for the new issue, which was announced this morning.

According to pre-announcement comparables circulated by the leads, DKB May 2032s – a Berlin-themed debut social housing issue from April 2022 – were at 5bp, while parent BayernLB green June 2032s were at 2bp and January 2033s, issued on 4 January, at 9bp. Berlin Hyp January 2033s and DZ Hyp November 2032 – both green and issued this month – were seen at 9bp and 12bp, respectively.

La Banque Postale SFH is set to launch its first social euro benchmark covered bond, an eight year transaction via BBVA, Commerzbank, Crédit Agricole, IMI Intesa Sanpaolo, ING and La Banque Postale, according to a mandate announcement today. Pre-announcement comparables circulated by the leads put LBP January 2030s at 19bp, mid, and its green May 2030s at 14bp, while CRH, SG, Caffil and Crédit Agricole paper in the 2030-2031 part of the curve was quoted at 22bp-24bp.

Slovenska sporitelna has meanwhile mandated a €500m no-grow three year Slovak covered bond, while Hypo Tirol Bank is due with the latest Austrian supply, a €300m no-grow five year debut green mortgage covered bond. Oberösterreichische Landesbank (Hypo Oberösterreich) yesterday (Thursday) priced a €250m August 2027 mortgage Pfandbrief at 27bp over mid-swaps.