Euro

The SSA market got back to business swiftly, if somewhat cautiously, this week, with taps and private placements (PPs) across core currencies coming quickly after the UK’s vote to leave the European Union. Although none of the trades were especially ambitious, their success has set a positive tone for the weeks to come.

A stronger picture is emerging for the eurozone periphery late in the week, after the region’s governments suffered a spike in yields in the immediate aftermath of the UK’s vote to leave the European Union.

Fitch has revamped its covered bond rating rules to reflect differences between national resolution frameworks that could allow covered bond liabilities to be partly bailed-in, in some jurisdictions. Upgrades are likely in low investment grade countries, and downgrades in high investment grade countries.

Several covered bond borrowers are eyeing the market for possible issuance next week from a range of eurozone and non-eurozone countries.

Italy took advantage of a fall in its yields since a Brexit-induced spike late last week to print five year debt at a record low rate on Thursday, while Portugal announced plans for an exchange offer.

The SSA market is bouncing back from the Brexit shock more strongly than many bankers anticipated, as the State of Hessen picked up more than triple its minimum €250m target in the first trade to hit screens since the UK vote.

Covered bonds continued to benefit from the general improvement in risk appetite on Wednesday with peripheral and non-core markets seeing the best interest, though volumes are light. UK covereds, in both sterling and euros, also presented good value.

Standard Chartered Bank has hired an executive director for its European corporate DCM team.

Capital Markets Union, one of the European Commission's most lauded initiatives, is likely to be one of the early casualties of the UK's decision to exit the European Union.

Covered bond sentiment improved on Tuesday in line with the wider credit market and despite negative rating actions on the UK sovereign. Technical factors are likely to continue to support spreads over the next few weeks. Though weak UK fundamentals could lead to issuer downgrades in the longer term, covered bond ratings are relatively well protected.

Spain’s 10 year bonds on Monday reversed all their Brexit driven losses, after the country’s voters showed a clear preference for pro-European Union parties at a general election on Sunday.

In the devastating aftermath of Friday’s UK referendum result, UK covered bonds have been marked wider in contrast to peripheral national champions that have benefitted from some short covering interest at the long end.