Euro

Euro covered bond issuance is ramping up with Westpac Banking Corporation joining Lloyds in the market on Wednesday. Despite a slower book build which drew criticism from rival bankers, Westpac took €1bn with a single digit concession.

Landesbank Baden-Württemberg has printed the first widely distributed euro benchmark in covered bonds since early June. Rival bankers said the deal proves that European investors are receptive to the right trade, but the Greek storm is not over yet and may mean that issuance windows are limited.

Poland’s new covered bond law is expected to come in to effect on January 1, following approval by the senate next week. The law will open up the Polish covered bond market to international investors as well as lifting the ratings of Polish covered bonds.

After announcing its intention to repurchase all of its series 7 and series 8 2017 covered bonds, Northern Rock Asset Management (NRAM) has set the purchase price on the notes. It is hoping to reduce its liabilities and close its covered bond programme following a successful buyback in March.

Northern Rock Asset Management (NRAM) intends to buy back all of its covered bonds due 2017 which are validly tendered, and was due to set the purchase price on Friday afternoon.

Caisse Française de Financement Local proved the resilience of the covered bond market on Thursday by printing the first euro deal from a European issuer in three weeks. The defensive three year tenor was exactly what the market needed, according to rival bankers, and paves the way for more short-dated euro issuance.

The Bank of Scotland has issued a consent solicitation requesting a switch from hard bullet to 12 month extendable soft bullet maturities for seven of its benchmark deals.

Piraeus Bank has cancelled its covered bonds which, along with all other Greek covered bonds, are no longer eligible for funding under the European Central Bank’s Emergency Liquidity Assistance facility. The move comes after ECB raised ELA collateral haircuts to a rumoured 45% with a warning that it may cut liquidity off completely two weeks from now.

The proportion of residential mortgages in Spanish Multi-Cédulas (MC) has risen, leading to an improvement in their credit quality, Fitch said on Tuesday.

Markets could be facing a protracted period of uncertainty, as a Greek exit from the euro seems more likely after the “No” vote in Sunday’s Greek referendum. The Eurogroup is expected to hold a summit on Tuesday when it will become clear whether or not there is a political will to do a new deal with Greece. Risk aversion should ultimately favour covered bonds, but borrowers will need to price deals cautiously.

As the technical backdrop looks stronger now than at any time this year, issuers should step up and execute funding plans before the Greece crisis gets any worse.

Santander has issued European covered bonds from Spain, Portugal and UK but could soon be about to issue Obligations Foncières from a new French programme. However, the sub benchmark sized deals are likely to be placed with the ECB said bankers.