Currencies

Deutsche Hypothekenbank found demand lacklustre for its seven year mortgage Pfandbrief on Tuesday, with even domestic buyers proving reluctant to participate.

Markit is expected to unveil a new tradable liquid covered bond index in October or November. Though it may not necessarily be actively traded, it should provide a more useful measure than the existing index, as it will help investors to gauge more closely their performance in relation to the most relevant parts of the covered bond market.

Deutsche Hypothekenbank Hannover mandated for its second benchmark covered bond of the year on Monday. The borrower is expected to price the seven year mortgage backed trade on Tuesday, taking the number of deals in that maturity year to date to almost double that of 2011.

Spain’s CaixaBank launched a novel covered bond tender offer on Friday. The borrower will buy back at par up to €2.11bn of floating rate bonds from retail clients but participating bondholders must keep the funds in a new deposit account for at least a year after the exchange.

Sampo Housing Loan Bank brought its first benchmark covered bond in almost a year on Thursday, pricing a successful €1bn no-grow jumbo trade.

Sampo Housing Loan Bank on Wednesday mandated for the sixth seven year covered bond benchmark of September, and should price the trade on Thursday. Despite a renewed appetite for risk in the wider market, covered bond supply remains consigned to safer names, but a successful auction for the Spanish sovereign could pave the way for further Cédulas.

BPCE mandated leads for a February 2018 covered bond on Tuesday. And though others borrowers are in the pipe, activity is not expected to be as busy as last week.

After the flurry of covered bond deals seen last week market participants had anticipated that there would be some follow through on Monday. Though it is likely that primary issuance will be seen this week, the supply outlook is likely to remain generally muted over the longer term.

France’s Axa Bank has returned to the market after a five months with a €500m seven year Obligation Foncière (OF). Though the transaction is backed by Belgian residential mortgages, it is structured under French law and, while it offers a decent premium against French OATs, the spread to Belgian OLOs is unattractive.

Austria’s Bank für Arbeit und Wirtschaft (Bawag) returned to the covered bond market for the first time in since 2010 on Tuesday, launching an inaugural mortgage backed benchmark.

After a six month absence Banco Sabadell returned to the covered bond market on Tuesday with a two year cédulas. Though it looks like the borrower will successfully raise its target €500m in line with guidance, bankers on the deal warned that the depth of demand for peripheral paper had become too thin to realistically consider another deal until after Wednesday’s German court ruling on the legality of the European Stability Mechanism.

New Zealand’s ANZ National launched its second ever euro benchmark on Tuesday, finding strong demand for a €750m five year deal. The jurisdiction offers an attractive pick-up over its Australian neighbour, which, together with the hunger for fresh supply, is helping raise the bid for New Zealand covered bonds, said syndicate bankers.