Euro

Royal Bank of Canada incurred the wrath of the market on Wednesday when it issued a €1bn deal from a €750m book. The spread, which offered an insufficient concession to Toronto Dominion’s earlier deal this week, widened by 4bp and caused the market to widen 2bp. At the same time Bunds fell sharply, suggesting the seven year may no longer be the market’s sweet spot.

SCBC mandated leads for a seven year covered bond on Wednesday, the second in that tenor from Sweden and the third in that tenor overall this week. The transaction comes as RBC struggled to build strong demand for its seven year after Bund yields soared. Yorkshire Building Society has responded to concerns around volatility and mandated leads for a shorter maturity.

Skandinaviska Enskilda Banken returned to the covered bond market on Tuesday after an 18 month absence to print a €1bn deal with a longer maturity, tighter spread and lower new issue premium than Toronto Dominion was able to do a day earlier.

The European Central Bank moderated covered bond purchases in its latest reporting period. While this was welcome news, analysts doubted the central bank had begun to taper purchases in earnest.

Royal Bank of Canada mandated leads for a seven year euro benchmark covered bond on Tuesday. The announcement comes a few hours earlier than usual and should give investors more time to consider the transaction which, if history is any guide, may be in a large benchmark size.

Compagnie de Financement Fonciere (CFF) has issued the first euro denominated three year conventional covered bond this year. Until recently, short dated covered bonds were trading with a negative yield in euros, something which made them impossible to sell. CFF’s trade has proved that this tenor is now open.

Skandinaviska Enskilda Banken AB (SEB) has mandated leads for its first covered bond since October 2013 and the third only Swedish deal to be issued this year. The deal is likely to offer three times the coupon of the previous Swedish covered bond.

Toronto Dominion was set to price the first covered bond of €1bn or more in nearly six weeks on Tuesday. The five year transaction, which was expected to offer double the coupon of its previous seven year launched in mid-April, was being closely monitored by a number of other issuers who are aiming to launch deals before the onset of summer.

Unión de Créditos Inmobiliarios’ has issued the first Spanish RMBS since 2007. Meanwhile, ING made its first appearance in two years with an RMBS backed by better quality collateral than many covered bonds, and with a much fatter spread.

The Romanian government has approved an update to the country’s covered bond law which will be presented to stakeholders in the near future. The draft, circulated by the finance ministry, proposed to align the current mortgage covered bond framework to better align it with other European jurisdictions.

Banca Monte dei Paschi di Siena (BMPS) could soon become the fourth bank to issue conditional pass-through covered bonds. It has announced a consent solicitation to amend the maturity structure of its existing soft bullet covered bond programme, which according to Moody’s will result in a rating upgrade.

Banco Sabadell was right to approach its possible 10 year covered bond with caution. But if it had been serious about the longer tranche, it would have shown the market a representative spread.