Euro

Deutsche Hypo priced a €500m six year on Wednesday in line with previous German deals, but with a considerably smaller oversubscription ratio than its previous two issues. Bankers were not hopeful the outlook for covered bonds would improve much in the next few months, but took heart from the fact that most investors are obliged to put their money to work.

BBVA returned to the covered bond market for the second time this year on Tuesday, opening books for a long five year. Despite pricing well inside Spanish government Bonos, and even though political instability was causing ructions in neighbouring Portugal, the national champion quickly built an order book unequaled in size in the Cédulas market for nearly four months.

National Bank of Australia issued a €750m seven year covered bond on Monday. The deal didn’t fly off the shelf, even though it offered a substantial premium to other bonds. The lack of ECB repo eligibility and slackening demand in the intermediate part of the curve was blamed.

The secondary market has been busier this week, with real money investors taking advantage of a cheapening in covered bonds relative to government bonds. With the ECB likely to step up purchases in the secondary market and government bonds, the outlook for the remainder of the year should be broadly supportive.

Covered bonds benchmark issuance could grow to as much as €180bn globally next year according to Crédit Agricole research. The main growth is likely to be seen in euro benchmarks where the analysts expect €150bn.

The Norwegian issuer surprised the markets with a rare three year on Wednesday. The deal was one of the largest issued in euros this year and attracted an exceptionally high quality order book, though the oversubscription ratio was less convincing.

TSB's UK prime RMBS programme made a solid start on Wednesday afternoon, as the bank placed a debut £537m-equivalent deal in sterling and euros. The issuer retained over two thirds of the sterling tranche despite offering a decent spread pick-up, but the euro tranche priced strongly.

Deutsche Apotheker- und Ärztebank, or apoBank, received a strong endorsement from investors for its first benchmark Pfandbrief in more than seven years.

A comparison of existing European covered bond laws suggests German credit quality will be hit hardest if Europe adopts a single covered bond framework. The European Commission has proposed a Pan-European covered bond law, prompting Moody’s to release the study this week.

Caixabank, Spain’s largest retail bank, priced a €1bn five year deal on Wednesday, attracting investors with a generous new issue premium. The transaction attracted the broadest and deepest distribution of any Spanish deal since July.

Initial price thoughts have been indicated for TSB’s first UK prime RMBS deal, with the transaction offering a pick up on both the euro and sterling tranches for investors, compared to more established issuers.

Deutsche Bank is set to go on the road and market its first Cédulas Hipotecarias, which was rated Aa2 with Moody’s on Monday.