A turnaround in financial markets in response to US president Donald Trump’s retreat on tariffs yesterday (Wednesday) was this morning leapt on by Caffil, who reopened the primary market sooner than expected with a successful €1bn 10 year green covered bond on reasonable terms.

Renewed weakness and volatility overnight Tuesday-Wednesday had all but extinguished hopes of primary market activity this week, but a 90-day pause on punitive tariffs announced by Trump late yesterday spurred a dramatic turnaround in sentiment, paving the way for the first euro benchmark covered bond in over a week.

“If Trump changes his mind every 36 hours, the market changes every 36 hours,” said a syndicate banker. “This French deal had been rumoured for some time and apparently they just looked at screens this morning, saw the CAC 40 and DAX up, and decided, OK, let’s get it going before he changes his mind again.

“This was a smart decision to the extent that they got the transaction going, and going really neatly.”

Leads BNP Paribas, Crédit Agricole, Commerzbank, JP Morgan and NordLB opened books this (Thursday) morning at around 9.15 CET with guidance of the 77bp area for the euro benchmark-sized April 2035 green public sector obligations foncières, expected ratings Aaa/AAA (Moody’s/DBRS). After close to 40 minutes, they reported books above €1.3bn, excluding €125m of joint lead manager interest, and after around an hour and three-quarters, the spread was set at 71bp on the back of orders above €2.3bn, including €175m of JLM interest. After two hours and a quarter, the size was set at €1bn on the back of books in excess of €2.2bn, including €100m of JLM interest, and the final book was above €2.1bn, excluding JLM interest.

Pre-announcement comparables circulated by the leads included Caffil July 2033s and social March 2036s at 66bp and 69bp, mid, respectively, and CFF March 2035s at 65bp, and another syndicate banker away from the leads put fair value at 67bp-68bp, implying a new issue premium of 3bp-4bp.

“There was maybe 1bp or so of atmospheric concession, if I can put it like that,” he said. “But at the same time, DZ Hyp last week had a relatively hard time on their 9.9 year.

“So Caffil’s €2.1bn final book and a €1bn deal, and the 6bp move from start to finish, there’s absolutely nothing wrong with this.”

In the last euro benchmark covered bond issuance on Wednesday of last week (2 April), DZ Hyp – as part of a dual-tranche trade – priced a €500m 9.9 year Pfandbrief at 47bp, following guidance of the 51bp area and on the back of €1.35bn of orders, with the new issue premium put at 2bp.

A more defensive maturity had been touted as the more likely way for issuers to enter the turbulent market, but another syndicate banker noted that Caffil’s offering clearly made sense for the issuer as well as certain investors.

“It offers 25bp more than DZ Hyp,” he said, “so maybe people just like this delta between France and Germany. And a three or four year would not have fit the funding profile of Caffil.

“They were perhaps not the most natural pick of the French candidates to reopen the market,” added the syndicate banker, “but then again, they are not the most price-sensitive, and are at the wide end of their compatriots, so in that respect they were maybe the right one at the end of the day – and, after all, the deal was a success.”

Caffil’s green covered bond is issued off the SFIL group’s green, social and sustainability bond framework, with the use of proceeds financing or refinancing green investments by French local authorities and eligible green French export contracts in five categories: territorial mobility and soft urban transport; renewable energy; energy efficiency of construction and urban development; sustainable water and sanitation; and waste management and valuation.

In spite of the primary market’s successful reopening, syndicate bankers were hesitant about predicting how supply might develop, even if a “backlog” of issuance has been cited.

“I would be surprised if this triggers a deluge of new deals,” said one. “I don’t think there are many people around who are contemplating coming in the short term, even if everyone is happy to have seen a deal coming and working.”