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LONDON, May 16 (IFR) - The Republic of France has opened books on its new 30-year benchmark, gathering strong interest despite relatively tight guidance.
Books opened at 14bp area over the 3.25% May 2045 OAT, the lead managers having begun marketing at mid-teens area, which attracted indications of interest above €18bn, excluding leads’ orders.
“IoIs are very impressive,” said a government bond trader away from the deal. “It is especially strong as we expect Belgium to come with a long deal soon too.”
The Kingdom of Belgium has cancelled its planned auction next week, fuelling expectations for a long-dated syndication.
“There is no massive premium for a 30-year either,” said a lead manager. “I see fair value at 12bp.”
France’s plans for a long-dated syndication were set out in its funding plan for the year and investors were well prepared for it to emerge after the French presidential elections.
“The 30-year OAT has lagged in the rally against Germany and appears cheap now,” said the trader. “The deal makes sense in relative value terms.”
The 10s/30s French curve has steepened by 12bp since April 19 to its steepest level since early March, while the 10-year spread against Germany tightened by 30bp during the same period as market participants repriced risk premiums in the wake of the election results.
“I don’t see a lot of potential for further tightening in 10-years,” said the trader. “But the long end offers a nice entry point to buy France.”
At 14bp over the May 2045s, the yield on the new bond will be just over the OAT April 2055s for a similar duration, which should support the deal too, according to the trader.
The bond, which matures May 25 2048, and is rated Aa2/AA/AA/AAA, is expected to be priced today via BNP Paribas, Citigroup, HSBC, JP Morgan and Societe Generale. (Reporting by Matt Painvin; Editing by Philip Wright)