Euro

Two European banks announced covered bond mandates on Monday – La Banque Postale in euros and BayernLB in dollars.

National Bank of Canada is on track to sell a $750m three year covered bond, its first covered bond in dollars since 2011.

Berlin-Hannoversche Hypothekenbank (BHH) mandated leads to market the first green pfandbrief, or Grüner Pfandbrief, setting the stage for further green covered bonds and RMBS due this year and next. In contrast to last year’s environmental and social governance deal from Münchener Hypothekenbank, the forthcoming transaction will be of benchmark size and will be backed exclusively by energy efficient buildings.

The German issuer mandated joint leads for a seven year €500m no grow mortgage backed Pfandbrief on Friday for likely issuance on Monday.

After a week of no euro issuance the primary market in euros is likely to pick up next week, when staffing levels should be back to normal. A mandate decision on a Nordic deal is expected on Friday afternoon and other core euro issuers are close to pulling the trigger. The dollar market remains open despite doubts over the depth of demand in the last deal from Bank of Nova Scotia.

The bullish tone in covered bonds continued on Thursday with successful senior unsecured and corporate deals buoying supply hopes for next week, which bankers expect to be busy.

The Bundesbank and European Central Bank have been actively lifting offers in Austrian covered bonds, with all bar one credit performing strongly since the end of March.

Primary activity in covered bonds is expected to resume on Wednesday, with high hopes that a deal will be announced later on Tuesday afternoon. Though the secondary market is quiet, bankers reported a much better tone into the close of last week as offers were lifted in recently underperforming deals.

Berlin Hypothekenbank has mandated joint leads for a European roadshow to market the first Green Pfandbrief.

The spread between the weakest and strongest covered bonds is tighter than at any point in the last five years, thanks to the European Central Bank’s backstop bid. But just because the ECB is willing to buy anything and everything that qualifies as a covered bond, that doesn’t mean investors should.

At the end of April Standard & Poor’s will roll outs its new multi Cédulas (MC) rating methodology. It expects 40% of deals it rates to be downgraded two to three notches and 40% to be upgraded about two notches. At the same time it will implement its European commercial real estate (CRE) rating criteria, which will result in 10% of covered bonds with commercial real estate in the pool being downgraded by one notch and no upgrades.

The Austrian state of Carinthia announced that it will provide a line of liquidity support to Austria’s Pfandbriefstelle. The decision suggests a slight improvement in the negative political backdrop dominating Austrian banks. Despite continued concerns, the recent sell-off has thrown up relative value opportunities, said analysts.