Covered Bonds

Yorkshire Building Society was overwhelmed with demand when it became the first UK issuer to tap the short end of the covered bond market this week, selling a Eu1.5bn three year deal.

Banco Santander Central Hispano shrugged off the bad news coming out of the Spanish real estate sector this week to price its Eu3bn two tranche cédulas issue at tight levels.

Ahorro Corporación Financiera has awarded a working mandate to four banks for the first AyT Cédulas Cajas dollar benchmark, which it expects to launch after the summer break.

Grupo Banco Popular built on the tightening of the cédulas market this year to price a Eu2bn 10 year issue at 6bp over mid-swaps this week, the tightest level achieved by a Spanish issuer in the maturity since October 2005.

Compagnie de Financement Foncier took advantage of the attractive conditions to launch one of its most successful ever obligations foncières benchmarks, a Eu1.25bn 12 year issue.

The volatility of early February was a distant memory this week as bonds and equities climbed to record levels.

Covered bond issuers will test the strength of the market at the long and short ends of the curve next week after the Easter break, which deterred any new jumbo supply this week.

Despite the long weekend, bond market participants failed to come back with renewed energy this week and the primary market endured one of its most sluggish weeks since the beginning of the year. However, this lack of primary activity was compensated by the usual sieving through central banks’ statements.

SEB squeezed in a Eu1bn two year jumbo mortgage Pfandbrief, its first, before the Easter break this week, getting the second quarter off to a quiet start.