Austria

CIF Euromortgage has added Eu70m to its 4% October 2016 issue, continuing France’s domination of jumbo supply through taps and new deals in January into February. Meanwhile the government-guaranteed sector in euros was subdued.

Real money demand and a strong domestic bid coupled with healthy participation from foreign investors contributed to a successful move into the unguaranteed senior debt market by Commerzbank on Friday.

Government guaranteed issues from La Caixa and Raffeisen Zentralbank yesterday (Wednesday) were both priced tightly in terms of their premiums versus their respective sovereigns. But while this did not get in the way of the Austrian bank’s transaction, syndicate officials away from the Spanish deal have criticised the spread.

Activity in the euro government guaranteed bank debt market has picked up since Monday’s Swedbank issue, but only moderately. And despite an improvement in market sentiment, covered bond banks are keeping investors waiting for a follow-up to last week’s jumbo from Crédit Agricole.

The government guaranteed bank debt market was the juncture of two waves of negative sentiment in the markets this week, as downgrades hit the sovereign market and financial institutions suffered renewed pressure.

Erste Bank will this (Friday) afternoon price the first Austrian guaranteed bank deal, two days after agreeing a debt issuance programme with the country’s Finance Ministry. Meanwhile a new, unique government-backed name could emerge next week.

Rating action: Moody’s yesterday (Thursday) placed on review for possible downgrade the long term debt rating of Austria’s Erste Group Bank (Aa3).

Moody’s yesterday (Wednesday) placed on review for possible downgrade the public sector covered bonds of Hypo Alpe Adria International (HAAI) that do not benefit from a grandfathered guarantee from the State of Carinthia.

Although the government guaranteed bank bond sector is maturing in the UK, the impact of broader issuance on the rest of the fixed income market has yet to fully play out, with the sovereign, supranational and agency sector throwing up new pricing surprises and some countries just beginning to gear up for issuance. Another shocking level appeared on screens only this (Monday) morning.

Moody’s yesterday (Thursday) placed on review for downgrade the Aaa rating of Kommunalkredit Austria’s public sector covered bonds, three days after the Austrian government nationalised the bank.

The Austrian government yesterday (Monday) nationalised Kommunalkredit Austria, acquiring Dexia’s and VBAG’s stakes in the public sector lender, which is the country’s biggest issuer in the international covered bond market.

The level of support banks can expect from their owners or governments was key to rating actions made by Fitch and Standard & Poor’s in the past 24 hours, as rating actions continued on covered bond-issuing members of groups that have been at the centre of the past fortnight’s emergency rescue packages.