Covered Bonds

Austria’s Bank für Arbeit und Wirtschaft (Bawag) returned to the covered bond market for the first time in since 2010 on Tuesday, launching an inaugural mortgage backed benchmark.

After a six month absence Banco Sabadell returned to the covered bond market on Tuesday with a two year cédulas. Though it looks like the borrower will successfully raise its target €500m in line with guidance, bankers on the deal warned that the depth of demand for peripheral paper had become too thin to realistically consider another deal until after Wednesday’s German court ruling on the legality of the European Stability Mechanism.

New Zealand’s ANZ National launched its second ever euro benchmark on Tuesday, finding strong demand for a €750m five year deal. The jurisdiction offers an attractive pick-up over its Australian neighbour, which, together with the hunger for fresh supply, is helping raise the bid for New Zealand covered bonds, said syndicate bankers.

Crédit Agricole and Austria’s Hypo Noe Gruppe Bank launched seven year public sector backed benchmarks on Monday, benefiting from strong domestic support amid an explosion of issuance across the capital markets.

Rabobank’s mortgage lending subsidiary, Obvion completed the first public RMBS deal of the autumn, pricing its Storm 2012-4 deal at levels that offered generous premiums for investors but nowhere close to the covered bond funding achieved by its Dutch peers.

Three European borrowers mandated covered bond deals on Monday, taking advantage of what could end up being only a brief funding window in the wake of the European Central Bank’s announcement last week that it would support peripheral sovereign debt markets.

The strong post-ECB rally seen in Spanish government bonds has resulted in a decent performance of Cédulas, and if the current mood can be sustained it could be only a matter of time before a Spanish issuer takes the plunge. But even if that does not happen, syndicate bankers anticipate three to five deals from other jurisdictions emerging in the next 10 days.

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.