Covered Bonds

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.

In the first euro benchmark trade for four weeks, Crédit Mutuel Arkéa sold its inaugural public sector Obligations Foncières on Tuesday. Syndicate officials had not expected a French issuer to reopen benchmark supply, though demand from domestic insurance buyers has been evident recently.

Bank of Ireland is poised to raise €1bn of secured funding in the private placement market, in what many bankers say is likely to have been a repo arrangement with a UK bank. The financing comes against a backdrop of improved investor perception of the Irish Republic itself, and though it is early days, it shows progress can be made when macro conditions stabilise.

As part of its 2011 Annual Index Review, Markit has announced a reduction in the minimum size of covered bond deals eligible for inclusion in its covered bond index from €1bn to €500m.

UniCredit’s German entity, HypoVereinsbank (HVB), brought its third covered bond of the year, a four year offering with a 2.125% coupon, on Tuesday. The borrower did not reach its target deal size and had to settle for a €500m print, with buyers taking smaller tickets than usual, suggesting they remain risk averse.

Deutsche Pfandbriefbank (pbb) returned to the covered bond market on Wednesday with its first benchmark since January 2010. The €500m five year trade is the second of three Pfandbriefe launched in the last two days and offered one of the highest spreads for German paper this year.

Austria’s Raiffeisen-Landesbank Steiermark brought its debut covered bond on Tuesday, choosing to test investor appetite for a new name with a three year €500m no grow deal.

Liquidity means different things to different people. This is problematic given its definition is likely to be pivotal to what is allowed into, or excluded from, the Liquidity Coverage Ratio. At the moment covered bonds, non-financial corporate bonds, SSAs and sovereign debt are all in.

Sentiment has clearly improved with two deals and one tap announced in the primary market, while bids have gingerly returned to the secondary market. However, investors, traders and syndicate bankers say the tone is skittish, leaving most feeling guarded.