Covered Bonds

At the end of a tumultuous week for Crédit Immobilier de France (CIF), during which the French government was forced to guarantee the mortgage lender’s commitments, The Cover understands that CIF remains in negotiation with La Banque Postale over a possible merger.

Moody’s cut Santander Totta’s covered bonds in line with the Portuguese sovereign’s new rating ceiling, which caps all the country’s covered bonds one notch above junk.

At the end of a tumultuous week for Crédit Immobilier de France (CIF), during which the French government was forced to guarantee the mortgage lender’s commitments, EuroWeek understands that CIF remains in negotiation with La Banque Postale over a possible merger.

UniCredit’s German arm HypoVereinsbank (HVB) returned to the covered bond market for the first time in almost a year on Monday. It extended its curve with a 10 year mortgage backed Pfandbrief, but divided syndicate bankers with its pricing.

Münchener Hypothekenbank made market history this week by selling the tightest ever euro benchmark covered bond. The borrower took advantage of investors’ desperate hunt for paper, breaking through the sub-Euribor barrier. But the secondary squeeze may have left Pfandbrief spreads with nowhere further to go.

Raiffeisenlandesbank Niederoesterreich-Wien (RLB NW) launched an inaugural benchmark covered bond on Tuesday, building a four times oversubscribed book for a 10 year mortgage backed trade.

Crédit Agricole gave an investor presentation for its new Obligations Foncières (OF) programme in Paris on Wednesday, ahead of what could be the first covered bond from a French issuer since late March. But though the domestic buyer base is desperate for fresh supply, covered spreads are uncomfortably close to OATs.

Covered bond issuance is on hold while the European Central Bank’s meeting in Frankfurt commands all attention. ECB president Mario Draghi is expected to provide details of a sovereign bond purchase programme and peripheral sovereign spreads have already tightened in expectation. But analysts said investors fearing a disappointing programme could switch to into covered bonds — with Cédulas the most likely to benefit from such a shift.

Australia and New Zealand Banking Group drew $4.5bn in orders for its latest financing, a dual tranche dollar covered bond, and followed competitor Commonwealth Bank of Australia in selling a senior unsecured transaction in the same sitting.

Crédit Agricole gave an investor presentation for its new Obligations Foncières (OF) programme in Paris on Wednesday, ahead of what could be the first covered bond from a French issuer since late March. French spreads have stopped grinding tighter in the secondary market, but some names still trade flat or even through OATs.

German Pfandbrief issuers have pushed primary spreads to record lows, but with minimal hope for secondary performance at such tight levels investors could start to push back on pricing.

Münchener Hypothekenbank made history this week, pricing the tightest ever euro benchmark covered bond. Despite the sub-Euribor level the public sector backed deal drew broad European demand that surprised even the issuer, a spokesman for which told The Cover it intends to return with another benchmark deal later in the year.