Covered Bonds

Bank Austria launched UniCredit Group’s first covered bond since October 2011 on Wednesday, and the second public sector backed benchmark in as many days.

Ravenous investors tossed aside their yield targets to pile into a stellar 10 year covered bond from Commonwealth Bank of Australia on Wednesday. The issuer increased its deal size to print a €1.5bn jumbo off a €4.5bn order book.

Landesbank Hessen-Thüringen (Helaba) broke ranks with cautious covered bond issuers on Tuesday to launch the first euro benchmark trade for two weeks, the first jumbo Pfandbrief since August 2011, and the tightest euro covered bond of 2012.

Primary supply slowed on Thursday as poor peripheral data helped increase volatility, though the market has €3bn in successful benchmark supply to digest. Berlin Hannoversche Hypothekenbank Aktiengesellschaft (Berlin Hyp) announced a tender of four public sector backed Pfandbrief trades, following a well received public sector backed deal from UniCredit Bank Austria.

Ravenous investors tossed aside their yield targets to pile into a stellar 10 year trade from Commonwealth Bank of Australia. The issuer increased its deal size to print a €1.5bn jumbo off a €4.5bn order book, making Australia the second most prolific jurisdiction of 2012, according to covered bond analysts.

Commonwealth Bank of Australia came to market with its second euro benchmark of the year on Wednesday. The 10 year trade drew huge demand, allowing leads to print a €1.5bn deal an exceptional 11bp inside of initial price thoughts.

UniCredit Bank Austria launched its first benchmark covered bond this year, selling a twice oversubscribed €500m no grow trade on Wednesday. The second public sector backed Pfandbrief in as many days was priced in line with revised guidance, attracting almost 100 accounts.

Landesbank Hessen-Thüringen (Helaba) sold Germany’s first jumbo covered bond in almost a year, and the first public sector backed benchmark of 2012. It also enjoyed the largest foreign participation in any German deal this year, and told The Cover it could return with a second trade if conditions are favourable.

Germany’s Helaba broke ranks with cautious covered bond issuers on Tuesday to launch the first euro benchmark trade for two weeks. The rare borrower found strong demand for a €1bn public sector backed transaction, and another deal out of core Europe is expected on Wednesday, said syndicate bankers.

Denmark’s Nykredit Realkredit will launch a new mortgage funding model this quarter, in an attempt to lower its covered bond issuance costs in an environment of falling house prices.

Hopes for imminent covered bond issuance dimmed on Monday as the asked for stability proved elusive. With government spreads still widening and background volatility persistent, even top issuers will have to offer positive new issue premiums to compensate buyers, said syndicate officials.

The European covered bond market is stabilising on Friday, with buyers reported in French and Scandinavian names. But the Spanish market remains shaky, and though selective bids returned the macro sovereign backdrop deteriorated after Thursday's brief impovement.