Covered Bonds

Syndicate officials remained hopeful that primary supply will continue into next week, though a German bank holiday on Monday and non-farm payrolls on Friday may narrow the issuance window. This week’s trades have been reliant on domestic banks and syndicate bankers are therefore still awaiting a broadly distributed jumbo trade to spur activity. With selling pressure in the secondary easing and one primary trade performing well, there is cause for a little optimism.

Many accounts and bankers are off to Munich for the beer festivities and with quarter end approaching, there has been a slight slackening of activity after a relatively good run this week. Spanish and Italian bonds are slightly softer versus the strong performance of their respective government bond markets.

It might have been a French issuer to have restarted benchmark activity in the euro covered bond market this week but all the subsequent supply came from German and Austrian Pfandbriefe issuers. Of the three small, overwhelmingly domestic transactions only a debut from Austria’s Raiffeisen Landesbank Steiermark could be deemed an outright success.

A first Swiss franc floating rate issue from Swedish Covered Bond Corp sustained relentless recent covered bond flow in the currency. But the product is now close to saturation point, bankers warned.

Rating: Aaa/AAA/NR

The dormant covered bond market was woken up this week after it emerged that the European Central Bank will consider a second covered bond purchase programme at next week’s policy meeting. But, the fact that none of this week’s deals reached €1bn, and that many were a long way short of that size, illustrates a continued lack of confidence borne by a belief that the prospective buying is no panacea.

France’s Crédit Mutuel Arkéa took advantage of a solid bid from domestic insurance companies and asset managers to price a €750m 10 year transaction on Tuesday — the covered bond market’s first euro benchmark trade in nearly four weeks.

Moody’s placed Cédulas Hipotecárias issued by Unicaja on review for downgraded yesterday, and those issued by Caja España de Inversiones, Salamanca y Soria’s (CEISS) on review for upgrade.

Deutsche Pfandbriefbank (pbb) has returned to the covered bond market after almost two years away. It sold a €500m five year mortgage Pfandbrief which was barely subscribed.

Fitch revised its outlook on Intesa Sanpaolo from stable to negative, on Wednesday, and affirmed the issuer rating at AA-

Austria’s RLB Steiermark negotiated tricky market conditions to make its covered bond debut this week. Competing on the same day as Deutsche Pfandbriefbank, which limped over the line, the debutant secured one and a half times oversubscription for its no grow €500m three year deal backed by public sector loans – clearly setting it apart from the competition.