Covered Bonds

A year after issuing its last euro denominated benchmark, Caisse Centrale Desjardins du Quebec (CCDJ) has mandated leads for a European roadshow.

While the week may have looked set to be busy following Monday’s fare, in which €5.4bn was priced across senior, subordinated and covered bonds, little meaningful supply has followed.

Swedbank returned to the sterling covered bond market to issue its second sterling deal this year. Though the issuer paid a minimal concession, the spread was almost double what it paid in August and the order book almost half.

The covered bond purchase programme (CBPP3) has been a roaring success from point of view of smaller banks in Europe’s periphery. But it may have simply postponed difficult choices.

The covered bond purchase programme (CBPP3) has been a roaring success from point of view of smaller banks in Europe’s periphery. But it may have simply postponed difficult choices.

Unione di Banche Italiane (UBI) and Monte dei Paschi di Siena (MPS) followed Banca Carige with €750m covered bond benchmarks on Tuesday. Like Monday’s deal from Carige, the two transactions were barely subscribed despite generous pricing, and heavily relied on demand from the Eurosystem.

Four issuers launched covered bonds on Tuesday following the four that launched deals on Monday, doubling supply from €3bn to €6bn so far this week. By virtue of its size, Compagnie de Financement Foncier’s (CFF) €1.25bn benchmark stood out, but the level of demand was far below its previous five year even though the concession was several times larger.

Covered bond sentiment has improved slightly from June, with investors becoming less pessimistic, according to a survey compiled by Crédit Agricole CIB research. Issuers have become less optimistic, but overall it is still a sellers’ market.

Moody’s has assigned a provisional Aaa rating to €8.6bn of class ‘A’ notes to be issued by FCT Crédit Agricole Habitat 2015, a vehicle for home loans originated by 39 regional French banks belonging to Crédit Agricole.

WL BANK AG has mandated leads for an eight year mortgage backed covered bond and Banca Monte dei Paschi di Siena (MPS) has mandated leads for its first conditional pass through, a long six year. Both transactions are likely to be priced on Tuesday.

Banca Carige raised €500m of five year covered bond funding on Monday with the rare 100bp spread providing enough juice to tempt some investors into the book, despite its junk rating from Moody’s.

LBBW issued a six year €500m German public sector Pfandbrief on Monday, pricing in line with Berlin Hyp and Muenchener Hyp.