Euro

European Union Commissioner Jonathan Hill embraced price differentiation and product diversity in covered bonds on Monday. The speech was widely welcomed by practitioners who fear that the ambitious approach to harmonisation advocated by the European Central Bank would be disruptive, unworkable and unnecessary.

BPCE issued a €1bn seven year mortgage-backed covered bond attracting an exceptional level of subscription from a broad range of real money investors. The transaction, along with earlier deals from AIB and CaixaBank, shows that the seven year tenor is now firmly back in vogue, offering the right trade-off between duration and yield.

Abbey National's €1bn five year issued Monday was comfortably oversubscribed but exhibited some price sensitivity.

Caixabank has become the fourth Spanish bank to tap the covered bond market this year with its largest Cédulas in five years. That four borrowers have launched similar sized deals of around €1.5bn so far this year suggests volatile market conditions are causing banks to frontload their funding.

Hamburger Sparkasse AG (Haspa) and Hypo Tirol Bank have respectively mandated leads for a roadshow and an investor call update.

The European Central Bank has said efforts to raise minimum standards in the covered bond market should be ambitious, and it sees considerable benefits in harmonisation. The ECB was responding the European Commission’s proposals for harmonisation of the covered bond market.

Principality Building Society priced its Friary No.3 prime UK RMBS deal, landing £475m in what one banker called a ‘tricky’ market. As with sterling covered bonds, the RMBS primary market also seems to be pricing at successively wider levels.

AIB Mortgage Bank attracted robust demand for its seven year covered bond, the first deal from Ireland this year. The transaction benefitted from a very attractive spread to the government curve compared with deals issued by Spanish and Italian banks, and the return of demand from asset managers.

Kookmin Bank was set to open books for its second dollar-denominated legislative covered bond on Thursday.

UK Asset Resolution, the UK government’s holding company that owns the mortgage book of Bradford and Bingley (B&B) following its nationalisation in September 2008, has announced a tender offer and early redemption of the issuer’s covered bonds.

Toronto Dominion Bank opened books for the fourth three year floating rate sterling benchmark of the year and was set to price the deal at the widest spread of the year. Kreissparkasse Koeln has announced a sub-benchmark sized eight year Pfandbrief.

Commonwealth Bank of Australia has successfully issued the first euro covered bond from an Australian bank in nearly 12 weeks. Swapped back into Australian dollars the 15 year tranche provided cheaper funding than the five year.