Covered Bonds

Compagnie de Financement Foncier built one of the largest ever orderbooks for a French issuer on Friday, pricing a €2bn 3 1/2 year trade flat to its outstanding curve. Short end trades have flown regardless of name or jurisdiction, and syndicate banks said reverse enquiry for Italian borrowers has now started to build.

Westpac’s inaugural euro denominated trade was a blow-out, with orders pumped up by demand from Germany and from bank investors. It attracted a bigger book than the combined orders for the first euro deals from National Australia Bank and Commonwealth Bank of Australia.

The steady stream of oversubscribed deals from peripheral, core and non-European issuers were reflected in Crédit Agricole’s February covered bond sentiment index, which recorded an all-time high for investors. This does not, however, mean that investors’ fundamental view has changed – rather that the strength of the rally leaves them with no choice but to dive in, the research said.

In little over a week five Spanish banks have attracted over €17bn of demand from 847 investors, enabling them to raise a collective €6.7bn. Not bad for a market that was closed just a few weeks ago — and well beyond the wildest expectations.

Westpac on Thursday priced its inaugural euro denominated trade, a four year offering that attracted €4bn of orders and laid another important benchmark for the burgeoning Australian market.

In little over a week five Spanish banks have attracted over €17bn of demand from 847 investors, enabling them to raise a collective €6.7bn. Not bad for a market that was closed just a few weeks ago — and well beyond the wildest expectations.

Abbey National priced a sterling covered bond on Wednesday, taking year-to-date supply in the currency to a record-breaking £7.2bn. The £1.5bn dual tranche trade boasted the longest deal of the year so far and the fifth short dated floater, an unconventional covered bond format that has dominated recent sterling issuance.

Austria’s Bawag has invited holders of its €1bn 4.25% 2014s to tender their notes and is willing to buy up to €500m at a spread of mid-swaps plus 55bp. The offer is unusual for being the first covered bond tender from a borrower in core Europe and the first which targets bonds that trade above par.

Swiss investors showed they were willing to trust the French again this week, as Caisse de Refinancement de l’Habitat priced a jumbo Sfr650m dual tranche covered bond. The Swiss had shunned France and financial institution borrowers in general during the recent zenith of the Eurozone crisis in the last quarter of 2011.

For the first time in Denmark, non-affiliated institutions will pool their mortgage loans to issue covered bonds.

Abbey National priced a £1.5bn dual tranche sterling trade on Wednesday, which boasted the longest covered bond transaction of the year so far, and the fifth short dated sterling floater.

Government owned Canada Mortgage and Housing Corp (CMHC) is approaching the statutory limit on the amount of residential mortgages it can insure. And, with the Canadian authorities keen to reduce the mortgage market’s reliance on the State, it is possible that draft covered bond legislation – that could be out as early as next month – excludes the use of CMHC-insured mortgage loans.