Covered Bonds

Santander’s Holmes 2011-1 issue will feature a hard bullet 0.9 year ‘A1’ dollar tranche, as well as a 2.9 year ‘A2’ dollar tranche, and 4.9 year ‘A3’ euro and ‘A4’ sterling tranches. The issuer has preplaced the $500m A1 notes. All the tranches will be floating rate, with the ‘A1’ notes benchmarked to one month Libor, and the other tranches to three month Libor or Euribor.

Measures to be implemented by the Spanish government in order to restore market confidence in the economy and domestic financial institutions could allow lower tier Spanish banks to resume issuance analysts say.

The mood is buoyant and several deals look likely to be announced before long. LTSB and Nationwide have been added to the existing rumours of La Caixa and Sabadell, but with sentiment improving issuers are thinking the market is on a roll so maybe they are better placed to wait a few days more, in which case funding costs could be shaved by even more.

Société Générale yesterday (Wednesday) priced its Eu1bn 4.25% 2023, a deal conspicuous for its level of oversubscription, the highest of any covered bond deal so far this year. Buoyant sentiment and rarity clearly played a role –along with the pervasive new issue premium which, not surprisingly given the scale of demand, was deemed by some to be too large.

CIF Euromortgage successfully priced (on Tuesday) a €1bn five year obligation fonciere achieving a high degree of oversubscription. Though it could have issued a bigger transaction, the bank opted for a quality placement that, for a French issuer, saw high penetration into the core North European buy & hold investor base.

Despite decent selling of 10-year paper in the secondary market, the overall tone remains very positive. In the primary market this was most conspicuous in the books for SG’s Eu1bn 12-year, which has attracted the largest oversubscription so far this year. Banco Popular's deal has also gone smoothly.

The National Bank of Canada’s inaugural covered bond deal arguably achieved what no other covered bond deal has been able to do this year. As opposed to coming with a hefty new issue premium, it priced through the closest comparables. Moreover, with an over subscription of 2.5 times, it attracted the highest level of oversubscription of any covered bond, at that time so far this year. The result had as much to do with the name as it did the tenor.

Fitch today (Tuesday) assigned Westpac New Zealand’s first series of mortgage covered bonds an expected triple A rating.

The new issue market is gingerly picking up steam with CIF Euromortgage imminent and Kommunalkredit on the road. Sentiment is positive and has been boosted by a likely strong result for the EFSF deal. That said it’s clear that issuers must continue to offer attractive new issue premiums especially in France, the most prolific of regions so far this year.

Nomura has hired a new covered bond syndicate banker, The Cover can reveal.