Euro

Ålandsbanken priced a €250m no-grow five year Finnish covered bond on Tuesday after an extensive marketing period. The trade offered a decent pick up over where the comparables named by the leads were quoted.

Leads KSK Koeln, LBBW, and WGZ opened books on an €250m eight year Pfandbrief for Kreissparkasse Koeln (KSK Koeln) on Monday as Bund futures showed signs of stability. Nordic issuers are circling and could take advantage of better conditions ahead of an EU meeting on Greece at the end of this week.

Despite the unexpectedly positive market tone on Thursday, bankers say that euro benchmark covered bonds are unlikely next week, as new issue premiums would need to be hefty. Several issuers are lining up for sub-benchmark trades however, and the sterling and dollar markets remain a possibility.

The German Pfandbrief market continues to shrink, driven by a decline in the public sector, which is now almost the same size as the growing mortgage sector, according to the first quarter cover pool data recently published by the Association of German Pfandbrief banks (VDP).

The European Covered Bond Council has proposed a new generation of secured funding notes, halfway between covered bonds and securitizations. But getting them off the ground is still in the hands of the regulators.

Fitch has put the £1.1bn of covered bonds issued by Clydesdale Bank on Rating Watch Negative (RWN) after its parent National Australia Bank said it intended to proceed with a sale of its subsidiary.

The long end of the French, Belgian and Dutch covered bond market is effectively closed for primary issuance because the rout in government bonds has made them too expensive. But bankers are hopeful that, with careful consideration of tenor and pricing, benchmark issuance should eventually return in shorter tenors, though probably not until June.

Kreissparkasse Koeln (KSK Koeln) has named lead managers for an eight year covered bond. The bank has issued two previous covered bonds, but this is the first time it is targeting investors outside of the German savings bank network. The deal is expected in the near future.

Moody's recent negative rating action on Pfandbriefbank, Hypo Vorarlberg, Hypo Tirol and Hypo Noe has failed to have any impact on their covered bonds. After coming under severe pressure three weeks ago most Austrian covered bonds have rebounded beyond levels that were seen just before negative headlines first appeared. But Komunalbank’s euro deals have not and could still perform.

Sparkasse Koelnbonn is meeting investors from May 18 for what is becoming its annual €500m bond issue. While the deal will only go live subject to investor feedback and market conditions, bankers are expecting a five to seven year transaction the week after next.

Ålandsbanken is lining up to price a €250m covered bond and is meeting investors in Europe from May 5 – 12. This will be the Finnish bank’s largest covered bond to date.

The sharp rise in Bund yields has caused huge mark-to-market losses, effectively wiping out the lifetime coupon payments of any seven to 10 year fixed rate covered bonds bought in recent weeks. Markets appear to have temporarily stabilised, but underlying uncertainty may temper demand for fixed rate bonds suggesting the floating rate market could offer a better alternative.