Euro

Investors, including the ECB, flocked to ING Belgium’s €1bn six year covered bond on Thursday illustrating that, for the right name and spread, demand can be counted upon. Rival bankers heaped plaudits on the deal given the state of the market, which they described as ‘ugly’.

The European Central Bank has scope to lower covered bond purchases and still hit its overall buying target said analysts at Barclays. Last week, the ECB bought less in the secondary market but made up the shortfall with increased buying in the primary market.

The German based rating agency, Scope, has assigned triple-A ratings to 340 European covered bonds. However from a regulatory standpoint the ratings are equivalent to Single A at the other main agencies, said analysts at Commerzbank.

The European Central Bank's covered bond purchase programme is once again regularly taking half or more of primary issuance, with negative repercussions. It should step back.

Banco Popular Español (BPE) returned to the covered bond market for the third time this year to issue a six year deal on Wednesday. After the relatively weak reception Caja Rural de Castilla-La Mancha (CRCLM) received for its similar six year on Tuesday, BPE did well to raise €750m.

Deals issued on Tuesday from Westpac New Zealand and Spain's CRCLM failed to gain much traction despite attractive pricing. Another from Bawag, its first in three years was more comfortably oversubscribed.

Swedbank defied a tricky market on Tuesday to raise €1.25bn in five year covered bonds, in a deal described by a rival banker as “outstanding”.

ABN Amro surprised the covered bond market on Tuesday with a deal that was both punchy in size, tenor and coupon. The 15 year transaction illustrated strong demand for duration and confounded the view that the market is oversupplied.

The Swedish bank has mandated leads for a five year benchmark that is expected to be launched on Tuesday. This will be its second deal in euros this year and its fourth overall.

Norwegian lender, SR-Boligkreditt issued its first euro covered bond on Monday, a €500m five year. The transaction offered a tempting spread pick-up to where Sparebank Vest issued an identical transaction last week thereby ensuring a strong reception, despite challenging market conditions.

Westpac's New Zealand subsidiary has appointed leads for its first euro covered bond, and the second from New Zealand, of the year. The transaction is expected to price on Tuesday.

Several covered bond issuers need to get up to speed with their funding plans before the start of October, though investor appetite is anaemic and set to wane further. And, with the probability of a Fed’ rate hike this year being underestimated by the market, a spike in rates volatility is expected.