Credit Agricole lands its tightest euro SNP in social debut

3 min read
Tom Revell

Credit Agricole stepped up to become the latest bank to lock in the historically tight levels available in the senior non-preferred market as it sold an inaugural social bond on Wednesday, pricing a €1bn seven-year at 60bp over mid-swaps.

The spread is the tightest ever achieved by Credit Agricole with a euro benchmark SNP - though it priced a shorter €1bn five-year deal at the marginally wider spread of 62bp in March 2018.

It is also the second tightest euro benchmark SNP of the Covid-19 era, behind only a Svenska Handelsbanken €500m seven-year green transaction sold last Wednesday at 40bp. Bankers said the trades demonstrate the strength of the market, while levels have returned to and in some cases surpassed those seen before the pandemic.

"Deals are getting absorbed so well and spreads are basically through the tights we saw pre-Covid," said a banker away from the deal.

Sole bookrunner Credit Agricole marketed the trade with initial price thoughts of mid-swaps plus 85bp area, before moving to guidance of 60bp-65bp (WPIR) and fixing the size at €1bn.

The deal was subsequently launched at 60bp on the back of more than €2.25bn of orders from around 150 accounts. It was priced with a coupon of 0.125% to yield 0.238%.

"It is late in the year, but looking at where we started and where we ended in terms of pricing, it went extremely well," said a source familiar with the trade.

As the whole market compresses, SNP yields and spreads have reached historic lows. The average yield of the iBoxx EUR Banks Senior Bail-in index was at 0.3% at Tuesday's close, after having risen slightly from the all-time low of 0.255% recorded last Thursday. Handelsbanken's deal neared negative-yielding territory, ultimately offering a yield of just 0.016%.

The average spread of the index, meanwhile, was 71bp at Tuesday's close, matching the levels seen in late February.

"It is incredible how everyone has accepted these levels," said a second banker away from the deal. "We have seen quite a year-end rally, which is a different pattern [from other years] but is not surprising when liquidity is so high."

"We have seen a bit of profit-taking but that has had no influence on levels, really. It is only one way at the moment."

Bankers said the deal was priced roughly flat to fair value based on Credit Agricole's conventional SNP curve.

Credit Agricole's last euro benchmark SNP was a €1.5bn 1% six-year non-call five transaction sold in April that was trading at 61bp on Wednesday morning, according to Tradeweb figures.

Credit Agricole is already an established green bond issuer, having sold three green bonds across the senior unsecured and covered bond markets since making its debut in November 2018, but the new issue is its first social bond.

The proceeds of bonds issued under Credit Agricole's social bond framework will be used for lending to projects relating to economic development, socioeconomic advancement and empowerment, and improving access to healthcare services. The framework has received a second party opinion from Vigeo Eiris.