A Crédit Agricole Italia €500m no-grow nine year OBG met with a stunning reception today (Wednesday) as its limited size, green label and triple-digit IPTs spurred some 200 investors to place more than €4.5bn of orders for the Italian covered bond, the most for a single tranche this year.

Following a mandate announcement on Tuesday, Crédit Agricole Italia leads Crédit Agricole, IMI Intesa Sanpaolo, Natixis, RBI, Santander and UniCredit opened books with initial price thoughts of 105bp-110bp over mid-swaps for a €500m no-grow July 2033 green OBG, expected rating Aa3. After around an hour and 10 minutes, they reported books above €2bn, and after less than two hours they set the spread at 90bp on the back of more than €3.5bn of demand, with the final book reaching some €4.5bn, with almost 200 accounts involved and some 180 of them allocated bonds.

“Almost all covered bonds have been going well,” said a syndicate banker away from the leads, “but this was something else!”

“A covered bond with a triple-digit starting level seems to have been enough to set the world on fire.”

A syndicate banker at one of the leads said the initial price thoughts were just one factor in the deal’s reception.

“The combination of WNG [will not grow] and green for a covered bond usually acts like vitamin C,” he said. “You add the three-digit component, and it felt like a riot.

“Almost 200 lines in a covered bond order book – I don’t remember the last time it happened.”

He said the one-and-a-half day process and price discovery had been important factors in the deal’s success. A wide range of feedback received, with indications of interest anywhere between 85bp and 110bp, according to the lead banker.

Some market participants away from the leads put the new issue premium as low as zero, although there was no firm consensus. The lead banker put it in the context of the very low mid-single digits.

As well as secondary levels for OBGs and BTPs, senior preferred bonds of Crédit Agricole SA, rated Aa3/A+/A+ (Moody’s/S&P/Fitch) were included in pre-announcement comparables circulated by the leads, with the bank’s January 2033s and November 2034s quoted at 97bp and 93bp, mid, respectively. CAI January 2032 and March 33 OBGs were seen at 79bp and 81bp, and its January 2038s at 92bp.

“Given the particular spread complex in the asset class,” said the lead banker, “the deal attracted a lot of credit buyers that we normally see in the lower part of the capital structure.

“The participation of UK buyers was amazing and the quality of the order book stunning,” he added. “The allocation process was painful and we had to zero many momentum buyers in order to favour green funds and early-birds.”

December 2029 and May 2033 BTPs were seen at 82bp and 112bp, respectively, and the final pricing was put at some 20bp through the sovereign.

“International accounts play the relative value game across European names and jurisdictions and ignore BTP valuations, but domestic accounts don’t and struggle to buy inside the sovereign,” said the lead banker. “It was important to strike the right balance and to maximise the audience at the start.

“The deal solidifies the strong momentum overserved in the asset class since the beginning of the year,” he added. “Pricing 20bp inside the sovereign curve is not something you could take for granted in the post-QE era. The distortion is indeed still elevated in the secondary market and people still have to digest the heavy legacy left by the ECB and CBPP3.”

The new issue is the longest-dated Italian euro benchmark in almost two years, with CAI having sold a €1bn 10 and €500m 20 year tranches on 12 January 2022.