Société Générale Home Loan SFH will price the largest French benchmark covered bond since March today (Thursday), a Eu1.5bn five year that met with strong demand, with a decent pick-up over French government bonds seen helping fuel appetite despite pricing inside the issuer’s curve.

Leads BBVA, Danske, DZ, ING, Santander and Société Générale gathered around Eu3bn of orders, on a pre-reconciliation basis, and are pricing the deal at 25bp over mid-swaps, which followed guidance of 25bp-27bp over, and initial price thoughts of the mid to high 20s.

The deal is Société Générale SFH’s third euro benchmark this year, and, noted a syndicate banker away from the leads, the first French euro transaction in the second half of the year to feature a five year maturity. CM-CIC Home Loan SFH tapped that maturity for a US dollar debut in early November, a $1bn 144A/Reg S issue.

“There hasn’t been much French supply in H2,” said the syndicate banker. “There have only been five deals and no five year, but SG got lots of demand. A Eu3bn order book is a big number for covered bonds these days.”

This is despite tight pricing, however, with syndicate bankers at and away from the leads seeing it coming inside the issuer’s secondary market curve.

“We started with a new issue premium, but at 25bp it will come inside the curve,” said a lead syndicate official.

The deal was also flat to covered bonds from French issuers such as Crédit Agricole, CM-CIC, and Compagnie de Financement Foncier, while a SG SFH 3.375% April 2018 issue was at 29bp/22bp over, according to bankers away from the leads.

One of them said that investors will have been interested in participating in SG’s deal despite aggressive pricing in part because it still offered value versus French government bonds. SG’s covered bonds are rated triple-A and come 25bp-30bp back of OATs, which are double-A rated by Moody’s and Standard & Poor’s, and AAA by Fitch.

“The deal also shows that the bid side of the secondary market might not be as aggressive as it should be in French covered bonds,” added the syndicate official.

Others said that SG was able to benefit from a spread tightening in French covered bonds as a result of the launch of a Eu1.25bn five year debut for Belgium’s KBC Bank on Monday, although one syndicate banker said that the repricing was minor, amounting to only a couple of basis points.

KBC’s deal was priced at 30bp over, and has since tightened, with SG’s benchmark seen coming flat to 5bp through the KBC secondary market level, a pricing relationship that the syndicate banker said underlined the strength of KBC’s deal given larger spread differentials between French and Belgian government bonds, and between French and Belgian bank senior unsecured debt.