Currencies

The covered bond market was quiet on Thursday, though syndicate officials said there were several borrowers that would like to complete trades before the summer lull. Prospective issuers have ample reasons to wait given that a resolution of the situation in Greece appears elusive. However issuers in the UK, New Zealand and Germany will have finished roadshows by the week’s end, and Italian and French names are monitoring the market.

Standard and Poor’s downgraded four Greek covered bond issuers from B to CCC, and removed them from credit watch negative on Wednesday, because of increased risk to their financial profiles.

While Finland dominated the primary market on Tuesday, pressure on peripheral names was still the story in the secondary. Italian borrowers are lining up, with a trio of issuers said to be monitoring the market, though a difficult backdrop may mean postponement until next week.

Finnish issuers Sampo Housing Loan Bank and Aktia Real Estate Mortgage Bank came to market on Tuesday. Aktia began taking indications of interest on its Eu500m five year trade following Sampo opening books on a 10 year deal, which will be priced later today.

Demand from insurance companies and pension funds for covered bonds has increased this year, according to Barclays research, while interest from central banks and asset managers has fallen. Germany and Austria are the only regions where overall investor interest for covered bonds has decreased noticeably, though in some jurisdictions investors have participated far less in issuance from certain countries.

Moody’s placed mortgage backed covered bonds issued by Banco Santander Totta (BST) on review for possible downgrade on Friday, after placing BST on rating watch negative on June 9.

Fitch downgraded cédulas hipotecárias issued by Caja de Ahorros y Monte de Piedad de Navarra from AA+ to AA on Friday, and removed them from rating watch negative, following a downgrade of the issuer rating from A- to BBB+.

Moody’s increased the refinancing margins and lowered the timely payment indicators (TPI) from very high to high on 12 Danish covered bond programmes on Friday, following a rise in adjustable-rate mortgage loans (ARM) in Danish cover pools.

Borrowers from peripheral and core jurisdictions priced over Eu6bn worth of benchmark covered bonds across three currencies this week, which included inaugural deals from Italian and New Zealand issuers. Prospects for supply next week are similarly diverse, though volatility and European holidays may narrow the window for issuance.

Moody’s cut covered bonds issued by Dutch issuer NIBC Bank from Aa2 to A1, following a downgrade of the issuer’s senior unsecured rating on June 3.

BNP Paribas priced its first public sector covered bond of the year on Tuesday, a well executed five year benchmark. The Eu1bn no grow trade was well oversubscribed, more bonds were placed with Asian accounts than domestic buyers, which a syndicate lead suggested was a first for French covered bonds.