Austria

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.

Bank Austria launched a Eu1bn three year public sector deal off the back of its largest order book yet on Wednesday. Though benchmark issuance stalled on Thursday, the trio of deals launched so far this week have been exceptionally well received, with the market rewarding rare high quality core names.

Having sold its first Eu1bn print in February, Bank Austria returned to market on Wednesday, convincing over 100 accounts to participate in a Eu1bn three year public sector backed benchmark deal.

Banque Populaire Caisse d’Epargne restarted benchmark issuance on Tuesday, launching the first euro denominated Obligations á l’Habitat. The inaugural Eu2bn deal was well received by a cash rich investor base that has had to make do with secondary market purchases since April 14. Though there was no further primary issuance, UniCredit Bank Austria and Sweden’s Stadshypotek mandated leads for three and five year deals respectively, to be launched in the near future.

The covered bond market remains primed for issuance despite the quietest week so far this year in terms of primary market activity. Spanish borrowers may join Abbey National and Westpac New Zealand in the market next week, though Abbey’s inaugural sterling issue and Westpac’s first covered bond transaction are set to take centre stage.

Bank Austria priced its first Eu1bn deal on Wednesday. Westpac New Zealand is expected to launch its first euro benchmark covered bond in the near future and Abbey National is due to finish roadshowing on Friday for its inaugural sterling issue.

Landesbank Hessen-Thueringen GZ had the market to itself on Monday, launching its second floating rate covered bond of the year. Though there was a mandate announcement from Caisse de Refinancement de l’Habitat, primary activity has begun to lessen. Nevertheless, names from further afield are on the horizon, with Portuguese national champions watching the market closely and New Zealand’s Westpac expected in the next few days.

The primary market has picked up, with two deals emerging and one pricing. Demand is robust and there is good scope for further issuance, say bankers. Deutsche Postbank opened and closed books on Tuesday morning for a Eu1bn mortgage backed 10-year Pfandbrief while Kommunalkredit Austria looked set to price a Eu500m five year later in the day.