Société Générale SFH is pricing the second new French benchmark covered bond of the year today (Wednesday), a Eu1bn no-grow seven year that was twice subscribed on zero new issue premium amid what bankers said are supportive conditions for low beta FIG supply.

A lack of supply, stable swap spreads and unchanged yields, plus a surprisingly positive economic sentiment ZEW number from Germany and rallying stocks are helping investors feel comfortable putting money to work, according to one syndicate official, with upcoming elections in Italy seemingly failing to trigger anticipated volatility.

This bodes well for further primary market activity, with syndicate bankers saying that more covered bond issuance could be forthcoming this week.

SG leads Banca IMI, Banco Santander, Crédit Agricole, Credit Suisse, Société Générale and UniCredit went out with initial price thoughts of the mid to high 30s over mid-swaps area and had gathered well over Eu1bn of indications of interest by the time they opened the order books with guidance of the 35bp over area.

Orders were approaching Eu2bn shortly before the order books were due to be closed at 1040 CET, with the re-offer spread fixed at 33bp over. A lead syndicate official said this was flat to the issuer’s secondary market curve.

Syndicate bankers away from the leads were complimentary about the deal, saying that it had gone well and that the right approach to pricing had been taken.

“It’s through secondaries and very close to BNP,” said one. “It’s a very good result and the starting point was absolutely right.”

He put a BNP Paribas April 2020 issue at 31bp over and said that a 2bp premium to this was a small concession.

Other syndicate bankers away from SG’s deal saw it as coming flat to through the issuer’s secondary market curve, with one citing mid-market levels of 31bp over and 44bp over for the bank’s March 2019s and January 2022s, respectively.

“In covered bonds there is zero requirement for core names to pay a new issue premium,” he said, noting that German accounts as an important source of demand despite them wishing for larger spreads.

He put the spread over OATs on SG’s deal at around 15bp – a “decent pick-up” versus that paid by other major French banks.

Caisse de Refinancement de l’Habitat is the only other French issuer to have sold a new benchmark covered bond this year, with French supply otherwise coming in the form of increases. CRH tapped the market on 4 January with a Eu1bn 12 year that came at 46bp over, almost flat to French government bonds. It sold a Sfr200m 10 year yesterday (Tuesday). (See separate article for more.)

Another syndicate banker away from SG’s deal said that the outcome was positive, “great”, even.

“It’s a higher yielding low beta option so still provides value,” he said, “but people didn’t expect pricing through to in line with secondaries. It’s the week for low beta.”

Sweden’s SEB kicked off euro FIG issuance this week with a tightly priced Eu1bn no-grow seven year covered bond on Monday, with BNP Paribas yesterday issuing its third senior unsecured bond of the year and ING Bank in the market today with a five year senior issue that is said to be going well.

In SSAs, meanwhile, Agence Française de Développement, is out with a five year issue that it had pulled in early February, with a syndicate banker away from AFD’s transaction noting that an extra spread of 5bp over French government bonds compared with what had been on offer earlier in the month made the difference, allowing for a good result.