Well-received covered bond and SSA supply on top of a rally of OATs encouraged BNP Paribas Home Loan SFH to yesterday (Wednesday) launch a four times subscribed Eu1bn seven year deal, said lead syndicate bankers, with one noting “unusually high” foreign demand.

A BNP Paribas branch

Leads BNP Paribas, Commerzbank, Danske Bank, UBS and UniCredit priced the Eu1bn no-grow deal at 22bp over mid-swaps after having gone out with initial price thoughts in the mid to high 20s over  area.

The deal is the issuer’s first in over a year and was the second French benchmark covered bond of the week after HSBC SFH on Tuesday launched a 10.5 year benchmark issue that was upsized from Eu1bn to Eu1.25bn following strong investor demand. More than Eu4bn of orders were placed for BNP Paribas’ issue, similar to the level of demand for HSBC’s deal.

Derry Hubbard, head of FIG syndicate at BNP Paribas, said that initial price thoughts were set in the mid to high 20s to allow for a modest new issue premium taking into account BNP outstanding 2020 and 2021 issues, which were trading at around 20bp over mid-swaps and 25bp over, mid market, respectively, before the announcement of the transaction.

“We opened books with guidance at 25bp on the back of Eu2bn of orders, and then revised guidance to 22bp-25bp,” he said. “There was zero price sensitivity in the order book.”

The issue was priced at 20bp over OATs, according to Hubbard.

Some 140 investors participated in the transaction, he said.

According to another lead syndicate banker, the bonds tightened some 4bp in the secondary market into the close yesterday. He said that the right execution strategy was chosen in that the deal was not pitched too aggressively, and that this allowed the “unexpected outcome” of being able to price the deal without a new issue concession.

He highlighted a strong Liquidity Coverage Ratio (LCR) ALM bid from France, and good interest from the Benelux and Asia, with the latter linked to Bank of Japan expanding its quantitative easing measures.

Another lead syndicate banker noted that the non-domestic distribution was unusually high for a French covered bond.

Germany, Switzerland, and Austria took 29%, Benelux 20%, Nordics 14%, Middle East and Asia 15%, France 10%, UK 5%, and others 7%. Asset-liability management accounts were allocated 45%, asset managers 40%, central banks and agencies 13%, and others 2%.