Currencies

The possibility of a covered bond issuer pricing a deal inside government debt, once considered highly improbable, is now conceivable, say Deutsche Bank and Barclays Capital.

Société Générale SFH has mandated BBVA, Crédit Agricole, Danske, ING, SG and UniCredit for its inaugural euro Obligations de financement de l’habitat, which will be launched in the near future.

CIF Euromortgage surprised market participants on Thursday, bringing a highly successful 10 year trade to a market many had deemed unreceptive to longer tenors. While Bayerische Landesbank and Eurohypo opted for short dated issuance, bookrunners on CIF’s Obligations Foncièrs benchmark trade were not initially confident in the choice of maturity.

After more than a week without benchmark euro issuance, three such deals were launched from core Europe on Thursday, as Eurohypo and Bayern LB came to market at the short end of the curve, while CIF Euromortage opted for a long dated transaction.

CIF Euromortgage mandated for, and then opened, a long 10 year euro trade through BNP Paribas, Deutsche Bank, DZ Bank, Natixis and Nomura. The leads will price the benchmark Obligations Foncièrs later on Thursday, having gone out with guidance of the high 70s over mid-swaps.

Eurohypo will price a benchmark mortgage backed Pfandbrief later on Thursday, having attracted three times as many investors as its last trade, for a transaction three times the size.

Santander priced its first UK RMBS deal of the year on Wednesday. The transaction was notable for its size, strong order book, wide distribution and competitive pricing. The RMBS suggests that a welcome degree of funding equilibrium may slowly be returning to these two key wholesale mortgage funding markets.

Standard & Poor’s on Friday cut public sector backed covered bonds issued by Banco Bilbao Vizcaya Argentaria from AAA to AA+, on negative outlook, because of its criteria concerning the rating of non-sovereign issuers that exceed the rating the sovereign in the European Monetary Union.

In a covered market dominated in recent weeks by rare and high quality issuance, market participants had awaited Dexia Municipal Agency’s five year Obligations Foncièrs with some trepidation. The deal was a resounding success however; with 100 accounts participating in the twice oversubscribed Eu1bn no grow trade.

Though primary supply slowed on Thursday the success of twin Eu1bn five year deals from WL Bank and Dexia on Wednesday proves the market remains receptive. Germany’s WL Bank convinced more than 100 accounts to participate in a no grown benchmark trade on Wednesday, which was well received by domestic and foreign investors.

Bank of China International, DBS and HSBC are managing the five year deal, and had declared pricing of 290bp over Treasuries by the time EuroWeek Asia went to press, although they were still working out the size of the transaction.

Dexia Municipal Agency brought a second Eu1bn no grow five year deal to market on Wednesday, after the publication of positive first quarter results. The trade was well received by investors, allowing leads to price inside of guidance on the back of a Eu2bn order book.