Currencies

After a three year absence, Bankia returned to the covered bond market in style on Wednesday. With a coupon that’s likely to pay a rare 1%, the issuer was able to attract a high quality, well oversubscribed, diversified book and paid virtually no new issue premium.

Nordea Finland attracted almost equal interest for both tranches of its 5.25 year and 12 year covered bond that was priced with barely any new issue premium on Tuesday. This symmetry to demand defied convention and illustrated strong comfort in the credit which enabled investors to reach for yield with a high degree of confidence.

Deutsche Pfandbriefbank (pbb) and Dexia Kommunalbank are both exposed to bonds which are likely to be written down following the debt moratorium issued by Heta Asset Resolution — the Hypo Alpe Adria bad bank — last week. Several other German covered bond issuers are likely to be affected, said Commerzbank analysts. Austrian issuers are also being hit and have been put on review for downgrade by Moody’s.

Muenchener Hypothekenbank (MuHyp) issued the tightest ever 10 year covered bond on Monday with a book that was built in record time. At €750m the deal was much larger than anything seen in Germany in this tenor for several years. The strong uptake underscores the fact that, despite the extraordinarily tight price and large size, the rare transaction offered compelling relative value.

The covered bond world descended on Canary Wharf for the IMN annual covered bond conference this week, for discussions on the credit (or is it rates?) product that still delivers a meaningful amount of FIG funding.

Swedbank and HSBC both issued €1bn euro-denominated seven year covered bonds on Wednesday. The slim pricing differential between the two transactions neatly illustrated that covered bonds not eligible for the European Central Bank’s purchasing programme have caught up with those that are.

The Finnish issuer has mandated leads for a roadshow that starts on March 16.

The European Central Bank bought more than €50bn of covered bonds in the first four months its third covered bond purchase programme (CBPP3). It now owns over 13% of the benchmark CBPP3 eligible market and could end up owning nearly 40% by September 2016.

Caja Rural de Navarra issued a €500m seven year mortgage backed Cédulas on Tuesday at almost half the spread level achieved by Intesa San Paolo in January. The strong outcome underscored the impression that spread tightening momentum for smaller peripheral covered bond issuers has continued undiminished.

Swedbank is expected to open books for a benchmark seven year covered bond on Wednesday having mandated joint leads BNP Paribas, Danske Bank, LBBW, Swedbank and UBS on Tuesday.

The Austrian Financial Markets Authority (FMA) said on Sunday that it will proceed with a resolution of Heta Asset Resolution AG (HAR), the state-owned wind down company responsible for disposing of the non-performing assets of Hypo Alpe Adria (HAA). The process is expected to provide the first practical test of the covered bond market’s exemption from bail in said analysts at Deutsche Bank.

The Spanish issuer has mandated Banco Cooperativo Español (no-books), BBVA, Crédit Agricole CIB, DZ Bank and HSBC as joint-lead managers for a euro-denominated mortgage-backed Cédulas. The seven year deal is expected to launched on Tuesday and will be rated A1 by Moody's.