Austria

Hypo Noe unexpectedly announced a three year transaction, having decided to hold off earlier in the month due to price sensitivity. Meanwhile ANZ New Zealand brought its long awaited covered bond debut, a five year euro deal, having postponed it in early June.

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.

Prospective issuers stayed out of the European covered bond market on Thursday, ahead of the afternoon ECB interest rate announcement and press conference in Frankfurt. A deal is highly unlikely on Friday, which means the week will probably end without any European supply at all. Looking ahead, Norway’s Terra Boligkreditt finished its roadshow on Wednesday and may be the prime candidate to resume euro supply early next week — as long as weekend headlines don’t spook markets.

Market participants were not swayed by a moderate rally in sovereign CDS and senior financials on Wednesday morning, preferring to hold out for a more stable backdrop. But with an ECB meeting in Frankfurt on Thursday and the Euromoney covered bond conference and ECBC plenary taking place on 14-15 September, opportunities for issuance might be limited to early next week.

Market conditions improved on Tuesday, though issuance remained elusive as issuers and investors waited to determine whether the relief would hold. Meanwhile Austrian, Norwegian, UK and French issuers are lining up.

Syndicate officials tried to remain positive in the face of worsening market conditions on Monday. After a strong post-summer reopening, market participants had hoped a full pipeline would carry momentum into this week. The primary market remained closed, however, and the secondary market is still hamstrung due to a lack of liquidity. Nevertheless, Raiffeisen Landesbank Steiermark has finished roadshowing and has mandated banks for a trade, while Norway’s Terra Boligkreditt will end its pre-deal investor meetings on Wednesday. Both benefit from strong credit fundamentals and relative rarity, and with investors keen to diversify into high quality paper hopes for issuance later in the week remain high.

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.

A steady supply of high quality Germany SSA paper continues to give the covered bond market hope it will be next in line to reopen. Raiffeisen Landesbank Steiermark is understood to be preparing for a covered trade in early September, and syndicate officials said high quality names from several jurisdictions are assured market access. In the secondary, however, peripheral covered bonds still lag the debt of their respective sovereigns.

Abbey, Compagnie de Financement Foncier (CFF), Dexia Kommunalbank AG, Erste Bank, La Caixa and UniCredit all made presentations to UK based investors at an event sponsored by Crédit Agricole CIB this week. Whilst it was clear that many issuers are well advanced in their funding for this year, and seem to have plenty of liquidity to draw on, it is also clear that when the funding window re-opens, issuance is likely to take-off.

Demand from insurance companies and pension funds for covered bonds has increased this year, according to Barclays research, while interest from central banks and asset managers has fallen. Germany and Austria are the only regions where overall investor interest for covered bonds has decreased noticeably, though in some jurisdictions investors have participated far less in issuance from certain countries.

German issuers, conspicuous by their absence from last week’s core paper jamboree, are back with a bang this week, after Deutsche Kreditbank, owned by Bayerische Landesbank, and UniCredit — came to market on Monday and Tuesday respectively. Domestic buyers did not let the banks down, putting in a solid bid.

Amid growing concern over peripheral euro sovereigns, covered bond analysts are focusing on the exposure to the troubled periphery of public sector cover pools in core jurisdictions.