Euro

Nordea Finland returned to the covered bond market on Monday to issue a €1.25bn seven year. In contrast to other recent deals, the transaction attracted solid demand of over €2bn from a wide range of investors and sets the stage for follow-on issuance.

The primary market is expected to pick up next week as a number of issuers will have finished roadshows and core issuers, possibly including some Nordic names, will return. Though dealer inventories are still high, they are falling thanks to improved central bank purchases which have helped to stabilise spreads.

Bank of Scotland is planning to make its return, after four years of absence, to the public UK RMBS market with a deal denominated in three currencies. Its parent company, Lloyds, has issued four covered bonds this year in sterling and euros.

Moody's has assigned a provisional A3 rating to the conditional pass-through covered bonds of the good bank carved out of Banco Espirito Santo. A second rating could follow, and may potentially presage a deal.

SumitG, a triple recourse programme sponsored and guaranteed by Goldman Sachs Group and Sumitomo Mitsui Trust Bank, will be backed at first entirely by senior tranches of European and Japanese RMBS. Over half of the collateral will be rated triple A, and none of the bonds are below A minus. Despite this the deal gets no rating benefit from the collateral pool.

The secondary market began to stabilise on Wednesday, with sentiment improving following a rally in subordinated bonds, and covered bonds seeing marginally better central bank buying. Though dealer inventories are high, the improvement in relative value compared to sovereign bonds bodes well for the market’s longer term performance.

Münchener Hypothekenbank (MuHyp) achieved a typically tight spread for its €500m six year mortgage-backed Pfandbrief on Tuesday. But market conditions did not support a return to the heights of their last deal in July, one of the tightest deals to have priced this year.

The Bank of Cyprus has got one step closer to issuing its first covered bond benchmark since being recapitalised. The conditional pass through programme got an investment grade rating from Moody’s, which for the first time took a fully de-linked approach.

Following the announcement of a rating upgrade of the Kingdom of Spain by Standard & Poor’s on Friday, several Cédulas programmes are likely to be upgraded. But since no regulatory rating thresholds is likely to be broken, spreads should be unaffected, said Commerzbank analysts on Monday.

September was a good month for Austrian issuers, with Erste Bank, UniCredit and Bawag all issuing benchmark size deals after a six month absence for Austrian issuers. Hypo Tirol are ready to join them, but question marks remain on how conducive the market is for new bonds.

Calls for breathing space have not deterred issuers with Eika Boligkreditt adding its name to the heavy pipeline.

The euro market’s strength over dollars is impelling public sector borrowers to line up the currency for rare or even debut visits — and there are strong signs this opportunity could last longer than earlier windows.