Crédit Agricole Home Loan SFH launched a Eu1.25bn seven year deal today (Thursday), which bankers said was well timed as it could benefit from renewed investor interest in core issuers following uncertainty in peripherals resulting from the outcome of the Italian elections.

Leads Crédit Agricole, Commerzbank, ING, Santander, Société Générale and UniCredit set initial price thoughts in the 40bp over mid-swaps area, guidance at 35bp to 40bp over, and then fixed the re-offer spread at 35bp over.

The order book was around Eu1.6bn, according to a lead syndicate banker.

The deal is the first euro benchmark covered bond to hit the market this week after the results of Italian elections were announced on Monday, with syndicate bankers away from the leads saying that the deal was timely.

The volatility sparked by the outcome of the Italian parliamentary elections earlier this week favours core European issuers, said one. The elections “opened investors’ eyes” to the uncertainty that remains in the periphery and the mark-to-market swings that come with holding peripheral bonds, he added.

Another syndicate banker away from the leads, however, questioned the choice of setting IPTs in the 40bp over mid-swaps area, especially in light of a recent Société Générale Eu1bn no-grow seven year deal that was priced at 33bp over mid-swaps on 20 February.

“Crédit Agricole reported negative results last week, and they did not announce a no-grow as SG did, but, still, going out at 40bp is a bit too defensive, and tightening by 5bp seems a bit odd to me,” he said.

However, he added that the end result was positive, considering that Société Générale’s recent deal was trading at 34-35bp. The deal offered some 9bp to 10bp issue premium, he said.

Another syndicate official said that given increased volatility and a dip in rates this week, the leads had taken the right approach to pricing. Starting with a spread that offered a bit of a premium and then “allowing the market to decide what it wants” was a sensible tactic, in particular if the issuer is aiming to size a Eu1bn plus deal, he said.

A lead syndicate banker said that Crédit Agricole had placed a very strong trade, especially in light of unsupportive market conditions.

The deal was the fourth euro benchmark seven year issue coming from a core jurisdiction in the past two weeks, after SEB, Société Générale, and Danske Bank placed well-received Eu1bn issues.

“Yes, this is once again a seven year tenor,” said a syndicate banker away from the leads, “issuers found the right balance as they like to go long and apparently the seven year maturity is liked by investors.”

In contrast to new benchmarks for SEB and Danske Bank last week, Crédit Agricole’s deal was not advertised as a Eu1bn no-grow, but as a euro benchmark.

“To get incremental demand over Eu1bn is where you need to talk with investors and discuss relative value,” said a syndicate banker away from today’s transaction, “and this year I would say that the new issue premium for that is worth up to 5bp.

“Crédit Agricole is giving itself the option to do a larger deal,” he added.

A lead syndicate banker said that in line with Crédit Agricole’s previous deals, it was “crystal clear” to investors that the deal would have been a minimum size of Eu1bn, but that presenting it as a benchmark gave the issuer a bit of flexibility on how much larger than that it could grow.

The deal was Crédit Agricole SFH’s first euro covered bond of the year. The French issuer’s last deal dates back to March 2012, when Crédit Agricole launched a Eu1.5bn five year deal priced at 63bp over mid-swaps. Crédit Agricole Public Sector SCF issued a Eu1bn seven year issue at 50bp over mid-swaps in September.