Caffil was last, but most definitely not least, in a series of four French 10 year covered bonds last week, generating a book of €10.1bn – the biggest for a euro benchmark, as investors seized upon attractive yields and relative value, according to Sfil head of funding and treasury Gonzague Veillas.

The mandate for Caffil’s 10 year benchmark was announced at around 12.00 CET on Thursday, just as BPCE was wrapping up a €1.5bn issue in the same tenor that had also attracted one of the largest ever order books, at some €8.6bn. That in itself was the third of four French 10 year transactions last week, including Caffil’s, after Arkéa Public Sector SCF had reopened euro benchmark covered bond issuance on the Monday with a €750m deal that attracted over €3.6bn of orders, and CRH had on Wednesday generated a €5.2bn-plus book for a €500m trade.

“Caffil is typically a long-dated player, and we knew already in December that the appetite for duration was likely to develop well, given the higher interest rate environment we have observed since November,” said Veillas, “and especially for French covereds, given the stronger relative value versus other jurisdictions.

“And that’s what we saw crystalise on all four 10 year transactions that came out of France last week.”

On Friday morning, leads BNP Paribas, Crédit Agricole, JP Morgan, Natixis and NordLB opened books with guidance of the mid-swaps plus 62bp area for a euro benchmark-sized transaction, expected ratings Aaa/AAA (Moody’s/DBRS).

After around 40 minutes, they reported books above EUR4.2bn, including EUR525m of joint lead manager interest, then after around an hour and a half, they set the spread at 51bp and the size at EUR1bn on the back of books above EUR8.7bn, pre-reconciliation and including EUR575m of JLM interest.

The final order book reached €10.1bn, the biggest ever for a euro covered bond, with 180 investors participating. The previous largest such book is believed to have been EUR9.2bn for a Deutsche Postbank five year public sector Pfandbrief in July 2009.

“The depth of demand was astonishing,” said Veillas.

Indeed, while the primary market can sometimes lost steam in the face of supply, the opposite occurred last week.

“Each day momentum seemed to increase in terms of the speed of bookbuilding and the size of the book,” said Veillas. “The first update, for example, was progressively earlier and stronger. So in this environment there was no concern about coming with the fourth 10 year tranche, because the level of demand was so high that it was strong enough for everyone.

“Investors very quickly understood that French covereds in this 10 year bucket is the precise segment to insist on if they want to lock in decent performance at the beginning of 2026.”

The four French 10 year trades were also priced at progressively tighter spreads: after Arkéa came at 56bp, CRH priced at 54bp, BPCE at 52bp and finally Caffil at 51bp.

“The syndicate had an expression for that,” said Veillas, “last mover advantage – when the market is so strong, it’s possible that coming last is an advantage, and we profited from that.”

At the time books were opened on Friday, Crédit Mutuel Arkéa’s new issue was seen at 52bp, mid, and both CRH’s and BPCE’s at 48bp, with Arkéa 1bp tighter than when Caffil’s mandate was announced the previous day and CRH 2bp tighter.

Caffil’s pricing was equivalent to 16bp through OATs, a record for the issuer.

Vincent Hoarau, global head of FIG syndicate at Crédit Agricole CIB, said the new issue played into the dynamics driving the covered bond market at the start of the year.

“The covered bond market is in full repricing mode,” he said. “More and more credit investors like the total return the asset class offers, while the track record of the segment in terms of resilience has been amazing throughout 2025. Unsecured senior spreads are trading at long time lows, playing positively for the asset class in terms of relative value. Meanwhile govies are no longer perceived as the risk-free benchmark.

“The liquidity-carry combo is going to continue to support spreads in secured funding,” added Hoarau. “The same for redemptions: in secured and unsecured preferred, they are 50% higher this month versus January 2025. So the compression mode is set to continue – particularly in a French segment that is still trading wide after a relatively difficult year.”

Some 180 investors participated in Caffil’s transaction, a record for the issuer as well as the overall Sfil group.

“One factor in the success of the deal was huge demand from the Nordics, with more than 20% of the book, and close to 30% for southern Europe,” said Ralf Berninger, head of investor relations and sustainability at Sfil. “That’s much higher than what we usually have from the Nordic region and southern Europe.”

The Nordics were allocated 23%, Spain and Portugal 20%, Germany and Austria 20%, the UK 8%, Italy 7%, Switzerland 5%, France 4%, the Benelux 4%, Ireland 4%, central Europe 3%, Asia 1%, and others 1%. Banks took 46%, investment managers 34%, insurance companies 12%, and central banks and official institutions 8%.

In spite of the huge level of oversubscription, Caffil did not increase its deal to the larger €1.25bn-€1.5bn sizes it has reached in recent years.

“We raised a decent amount of pre-funding in November and December, especially in longer maturities,” said Veillas, “so we were in a very comfortable position coming into 2026. We were therefore very happy with €1bn and no more when targeting 10 years.

“We also have the capacity later in the year to be reactive with taps of our outstanding bonds.”

Caffil intends to issue between €6bn and €8bn in covered bonds in its 2026 funding programme, with parent Sfil targeting €1bn-€3bn.

“This transaction marks a great start to the year,” said Olivier Eudes, head of ALM and financial markets. “With a total funding plan between €7bn and €9bn for 2026, we will continue to be active both in the SSA and in the covered bond market.”