A €4bn seven-year social bond for Caisse d'Amortissement de la Dette Sociale received bumper books of over €26bn on Tuesday, highlighting once again the change in fortunes for French agencies after a torrid second half of 2022.
Demand for the French agency's trade was almost on a par with that seen for Spain on the same day, landing at over €25.3bn, excluding joint lead managers' demand, versus books of over €26.83bn for Spain's July 2039 syndication, also excluding JLM demand.
While public sector borrowers have been able to go further out on the curve in 2023, demand has been a lot more buoyant up to 10 years. In the case of French agencies, there is an additional dimension, with the sell-off in OATs making them look attractive again versus mid-swaps.
"It's coming around 6bp over mid-swaps and I think the general consensus among investors is that swap spreads won't be underperforming massively from here and that we've reached a floor," a lead said. "Yields have gone back up and you're now getting 10-year OATs at 3% and your spread here is over 30bp over OATs. All of this helps."
Credit Agricole, JP Morgan, Morgan Stanley and Natixis priced the trade at 31bp above OATs, 3bp in from guidance. That spread left a 3bp new issue concession, said a senior banker away from the transaction.
Cades’ print was “in line with what we have come to see from a lot of the French agencies", he said. "The repricing versus swaps has been particularly powerful for the names that price versus their govvies – so the outperformance of French and Spanish agencies and regions is not necessarily a surprise.
“You’re coming into a market where you have German Laender pricing negative versus swaps all the way out to 10 years. You have KfW and European Investment Bank, which continue to outperform. And then you have Cades, which is able to come into the market, yes offer a few basis points of concession, but price at a fairly decent spread versus swaps in positive territory. That’s attracting a lot of investors to the table.”
Cades’ French peers have performed well in 2023, not least Caisse des Depots et Consignations, which secured a record book of more than €8.3bn on a €1bn long 10-year deal earlier in February.
“What worked against the French agencies [in 2022] is working for them [this year]” a lead on that deal said at the time. He was referring to their pricing versus OATs, which made them look expensive on a mid-swaps basis in 2022 but is now making them look attractive from that perspective.
German Laender were also represented in the primary market on Tuesday. Brandenburg priced a €600m nine-year at 4bp through mid-swaps, 1bp in from the starting spread. The leads Barclays, DekaBank, Erste Group, HSBC and UniCredit gathered a €770m book.
The issuer had initially been looking at a €500m deal, a lead on the print said. He did not comment on the new issue premium.