Covered Bonds

Long dated paper continued to prove popular in the covered bond market on Tuesday morning, with Caisse de Refinancement de l’Habitat (CRH) opening books on a 10 year deal, becoming the first French bank to issue since the market re-opened last Wednesday. Austria’s Erste Group Bank also tested investor appetite for a seven year trade.

French, UK, Swedish and Austrian issuers launched deals across the covered bond curve on Tuesday, as the market backdrop continued to improve. Caisse de Refinancement de l'Habitat and Austria’s Erste tapped the longer end (see separate story), while Barclays Capital and Swedbank launched three and four year trades respectively.

Analysts warned about the outlook for UK banks this week, saying their cost of funding will rise if ring-fencing proposals are implemented.

UBS was one of three issuers that came to market with a euro benchmark on Thursday, taking advantage of the first issuance window in roughly two months. The Swiss borrower secured a twice covered book for its three and a half year paper, including a significant proportion of new investors.

Despite a meeting of the world’s central bankers at Jackson Hole Nordea Bank Finland kept the primary market alive on Friday, launching a successful €1.5bn five year deal. Syndicate officials welcomed three consecutive days of primary supply, though market conditions have deteriorated since a trio of well received benchmark trades on Thursday. Secondary liquidity still leaves much to be desired, they said, and has not been helped by the attractive premiums offered by the latest issues.

UniCredit brought the Italian covered bond market back to life in dramatic fashion on Thursday, offering hopes of market access to other issuers from the jurisdiction. In addition to boasting a record high spread for an Italian issuer, UniCredit reports that the €1bn 10 year trade also carried the tightest ever spread to BTPs, pricing flat to the sovereign curve.

ING this week confounded predictions that it would take a German or Nordic name to reopen a European covered bond market that had been inactive for almost two months.

UniCredit brought the Italian covered bond market back to life in dramatic fashion on Thursday, after almost three months without a deal from the country. The national champion surprised market participants with its ¤1bn, 10 year issue, many of whom had dismissed the possibility of peripheral issuance while the eurozone sovereign debt crisis continued to rage.

Euro covered bond benchmark supply reached almost €5bn in just two days this week, as UBS and Eurohypo tapped the short end of the curve on Thursday, following UniCredit’s 10 year OBG and ING re-opening the market on Wednesday.

UniCredit reopened the Italian market once again on Thursday, to the surprise of market participants. After almost three months without Italian supply, the national champion followed ING into the 10 year segment, launching a €1bn no grow benchmark. Syndicate officials disagreed over where the deal priced relative to BTPs, with estimates ranging from flat to 10bp over.

ING on Wednesday confounded predictions that a German or Nordic name would end almost two months of inactivity in the covered bond market. The borrower launched a bold €1.75bn 10 year transaction, which offered investors a generous 15bp concession over its outstanding curve, providing the market with an indicator of the higher premiums now needed to print deals.