France

Société Générale yesterday (Wednesday) priced its Eu1bn 4.25% 2023, a deal conspicuous for its level of oversubscription, the highest of any covered bond deal so far this year. Buoyant sentiment and rarity clearly played a role –along with the pervasive new issue premium which, not surprisingly given the scale of demand, was deemed by some to be too large.

Despite decent selling of 10-year paper in the secondary market, the overall tone remains very positive. In the primary market this was most conspicuous in the books for SG’s Eu1bn 12-year, which has attracted the largest oversubscription so far this year. Banco Popular's deal has also gone smoothly.

The new issue market is gingerly picking up steam with CIF Euromortgage imminent and Kommunalkredit on the road. Sentiment is positive and has been boosted by a likely strong result for the EFSF deal. That said it’s clear that issuers must continue to offer attractive new issue premiums especially in France, the most prolific of regions so far this year.

Crédit Agricole has recently been on a hiring spree in the covered bond and SSA space.

After a slow Wednesday, the European primary market aggressively picked up pace on Thursday with a range of seven deals from six jurisdictions was announced. Many have gone live and all appear to have been readily digested –in large part reflecting the constructive underlying tone to credit markets.

Moody’s expects negative rating actions on covered bonds to substantially outnumber any positive actions in the year ahead, due principally to weakness in the sovereign and banking sectors.

The focus of attention today is on Dexia MA which is expected to price a 10-year Obligation foncières this afternoon in line with guidance of mid swaps plus low 100bp area through joint leads Crédit Agricole, Dexia, DZ, and SG.

After the flurry of four deals that priced yesterday afternoon (See separate comments), the market has gone into radio silence.

CM CIC yesterday priced the first French covered bond to extend beyond the well populated 10-year part of the curve, issuing a Eu1bn 12-year. The 4.125% due 16 January 2023 was jointly led by Barclays Capital, Deutsche Bank and HSBC.

The primary covered bond market continues to power ahead with four transactions currently being marketed. LBBW, Dexia Kommunalbank, NordLB and CM CIC are in the market with three, five, 10 and 12-year covered bonds respectively.

Caisse de Refinancement de l’Habitat became the fifth French issuer of the new year to price a benchmark covered bond yesterday (Thursday), having originally planned to print next week according to a syndicate official at one of the leads.

The covered bond market has experienced its busiest ever week with as many as 15 deals pricing, giving a grand total of about Eu19bn over the holiday shortened week.