Currencies

Austria’s Vorarlberger Landes-und Hypothekenbank (Vorarlberger Hypo) made its mortgage Pfandbrief debut on Tuesday, selling a tightly priced seven year bond and taking supply in that maturity to over €4bn in only a week.

HypoVereinsbank (HVB) closed a €500m seven year mortgage Pfandbrief on Monday after opting for a more generous starting point than those on recent German deals. It was rewarded with a far larger orderbook, which allowed it to price the bond well inside initial price thoughts.

Crédit Mutuel CIC sold its first covered bond of 2013 and its first euro benchmark in over a year on Monday, launching a €1.25bn seven year transaction flat to its own curve.

Covered bond syndicate officials are predicting as many as five deals will be launched next week following a wave of successful core transactions.

The quiet period for FIG ended this week with a handful of deals emerging in the covered bond and senior unsecured markets. And in contrast to several tightly priced core European deals seen earlier this year, in which investors had pushed back on terms seen as too aggressive, bankers are now reporting a shift in sentiment.

Two leading covered bond investors based in Germany have told The Cover why they are investing, despite record low yields, and what strategic shifts they are pursuing.

Westpac has returned to the euro covered bond market for the first time since last July, mandating leads for another seven year. It follows trades from BNP Paribas and HSBC where demand was fuelled by central bank statements, that bankers said had exacerbated a short squeeze, causing investors to give up new issue premiums to get current coupon exposure.

Bayerische Landesbank sold a smoothly executed €500m 10 year transaction on Thursday, with cash rich investors willing to compromise on tight spreads and low coupons. But peripheral issuers could soon offer them juicer yields, said bankers.

Münchener Hypothekenbank (MuHyp) closed another successful euro benchmark this week and could visit the dollar market later in the year. But it also has its sights on the sterling market, where investors have become increasingly receptive to the tight spreads German borrowers offer.

Germany’s Münchener Hypothekenbank received €900m in orders for an eight year mortgage Pfandbrief on Wednesday, despite pricing it tighter than the Austrian sovereign’s 10 year issue on the same day.

Neil Sankoff, head of senior funding, in HSBC's global balance sheet management division, has spoken to The Cover about Tuesday’s €1.25bn 10.5 year Obligation à l'Habitat and the bank’s global funding strategy. With no formal marketing, the deal was all about timing, he said.

Persistent interest from domestic investors prompted HSH Nordbank to increase a recent €500m public sector backed bond by €250m.