Euro

Hypo Noe priced its inaugural €500m Austrian mortgage-backed Pfandbrief on Monday through the bid side of its interpolated public sector curve, and with barely any sensitivity in the book. The strong result is a testimony to the enhanced demand for all covered bonds that offer a spread over mid-swaps and anything that is potentially eligible for the forthcoming European central bank purchase programme.

The European Central Bank's Targeted Long-Term Refinancing Operation (TLTRO), which will be launched on September 18, is unlikely to kick-start bank lending in southern Europe, said Fitch on Monday.

Credit Suisse (CS) opened books on Thursday for its second seven year euro deal of the year. Leads ascribed the 3bp pickup offered against Wednesday’s Bank of Nova Scotia (BNS) deal to the Swiss bank’s lack of LCR eligibility.

Westfälische Landschaft Bodenkreditbank (WL Bank) opened books on Thursday on an AAA rated €600m no-grow 10 year mortgage-backed Pfandbrief, its second deal of the year and the fifth 10 year print to come out of Germany in 2014. In contrast to Aareal Bank’s deal on Wednesday WL’s order book was oversubscribed many times.

Abbey National returned to the euro covered bond market for the first time this year on Thursday, following the same dual tranche format that Nationwide and Helaba have successfully established. Though UK bonds are unlikely to be eligible for the European Central Bank’s forthcoming purchase programme, both tranches priced with a negligible new issue premium with well oversubscribed and granular demand.

Hypo Noe has mandated leads for its inaugural mortgage backed Pfandbrief, to be launched next week.

Bank of Nova Scotia was set to price the tightest and longest Canadian covered bond issued in euros on Wednesday. It was also the tightest spread for any non-German seven year seen this year, and at €1.5bn the largest in that tenor.

Credit Suisse mandated leads for a euro benchmark on Wednesday. After roadshowing earlier this week, Santander UK’s subsidiary Abbey has held back from the market following the tragic news that the banking group’s executive chairman passed away on Tuesday.

Aareal Bank capitalised on the momentum created by the two successful French deals issued through mid-swaps on Monday and Tuesday by bringing forward plans to issue a euro-denominated covered bond, opening books on a three year deal on Wednesday rather than waiting until next week.

The covered bond market passed another milestone this week with core transactions attracting book sizes that were reminiscent of the yieldy peripheral deals seen a year ago, but at spreads well through swaps. With supply likely to slow after September, the European Central Bank ready to absorb a large portion of whatever is subsequently issued and sovereign yields expected to head further into negative territory, the technical squeeze will become much tighter.

The frenzy of demand for Compagnie de Financement Foncier’s (CFF) five year deal on Tuesday demonstrated that the market’s psychological resistance to sub-Euribor pricing has well and truly crumbled.

The European Central Bank surprised ABS bankers and infuriated many of their covered bond peers on Thursday by committing to a broad purchase programme for both asset classes. The move was welcomed in the ABS market and sparked a fresh hunt for secondary paper, but deprived of more detail bankers were unable to say how quickly the measures would encourage more primary issuance, if at all.