Currencies

Barclays Capital shrugged off sovereign rating action and the possibility of a Greek default to launch a well oversubscribed euro benchmark on Wednesday. The covered bond market remains technically well supported despite negative headlines, and syndicate bankers still expect issuance to move down the credit curve as blackout periods end.

Spain’s Bankinter and Bankia are expected to launch short dated trades later this week, after the primary market paused for breath on Monday. Cash rich investors with an appetite for risk should ensure they get a strong reception, but negative rating action could yet cause them to hold off.

The bullish market was again in evidence at the end of last week after CFF issued a €2bn August 2015 at mid-swaps plus 95bp on Friday. Though this was flat to its curve, the borrower attracted a €7bn book from about 270 investors.

Compagnie de Financement Foncier built one of the largest ever orderbooks for a French issuer on Friday, pricing a €2bn 3 1/2 year trade flat to its outstanding curve. Short end trades have flown regardless of name or jurisdiction, and syndicate banks said reverse enquiry for Italian borrowers has now started to build.

In little over a week five Spanish banks have attracted over €17bn of demand from 847 investors, enabling them to raise a collective €6.7bn. Not bad for a market that was closed just a few weeks ago — and well beyond the wildest expectations.

CaixaBank’s €1bn five year offered further proof of returning confidence in the Cédulas market. The deal attracted another large, regionally diverse book, enabling the issuer to print without a new issue premium.

The covered bond primary market remains on fire with deals from the UK’s Abbey National in sterling and Spain’s Caixabank in euros, quickly oversubscribed — allowing leads to move guidance towards the tight end without fear of losing orders. But accounts that had driven the short end of the secondary market tighter since the start of the year are now taking profit, or at least losing interest in adding to their positions — hinting that current euphoria may reach its limit before long.

BPCE convinced more than 140 accounts to participate in the first French trade of 2012 not to tap the long end of the curve, with a huge bid from asset managers unable to buy short dated paper providing added granularity. The BPCE group has issued over €3bn so far this year — around 25% of its covered bond funding plan, though it aims to be active throughout the year.

Banco Sabadell’s €1.2bn three year demonstrated that Spain’s second tier of borrowers has regained market access. With many Spanish banks waiting for the rating consequences of new banking groups and mergers, a benchmark gives rating agencies a timely display of credit strength.

For the first time in Denmark, non-affiliated institutions will pool their mortgage loans to issue covered bonds.

BPCE launched the first French five year trade of 2012 on Monday, into a market still desperate for new supply across the curve.

Banco Sabadell brought the first deal in nine months from a second tier Spanish issuer on Monday. Rather than wait for a second round of ECB long-term refinancing operation (LTRO) funding, the borrower opted for a more expensive funding option to show the market and rating agencies that it still has wholesale access.