Euro

Westpac New Zealand paid the tightest spread, the lowest coupon and drew one of the most granular order books for one of the largest ever covered bonds from the region. Jim Reardon, who is head of funding at the bank, told The Cover on Thursday that the success of the deal was driven by the new legislative framework — a fact that other New Zealand issuers will want to take advantage of.

Nationwide opened books on Wednesday for the first post-crisis UK dual tranche covered transaction, and only the second from any jurisdiction this year. The success of the deal may establish dual tranche syndication as a benchmark for those issuers looking to raise size without compromising execution.

Nationwide has mandated leads for the third UK covered bond in euros this year. Though a firm decision on structure and tenor has not been taken, the issuer is testing appetite for a dual tranche offering that could involve the longest dated issuance seen in euros for years, to be launched Wednesday.

Berlin Hyp opened books on Monday for a deal which gave a positive litmus test on the condition of the core Pfandbrief market. The issuer may have been able to price a €500m deal at flat to Euribor but opted for a more liquid size at 1bp over mid-swaps in a move that was applauded but which shows resistance to sub-Euribor pricing has yet to be broken.

BPCE, Muenchener Hypothekenbank and Belfius Bank all launched 10 year covered bonds on Monday, underscoring the impression that investors are confident European yields could keep heading lower. Where once long end demand was dominated by real money, banks are now more dominant, a change that has been driven by the improved status of covered bonds in the liquidity coverage ratio.

Berlin Hyp is set to open books for a quick-fire five year on Monday and ahead of the Germany-Portugal World Cup match later that day. MuHyp and BPCE have also mandated leads.

Following the June 5 ECB announcement Bonos have rallied strongly, while Cédulas have reacted to a lesser extent, leaving clear performance potential, a Barclays research note published on Thursday argues. But what is nice in theory is more difficult in practice, traders said — large blocks of Cédulas are difficult to source without pushing up prices.

The Austrian government's decision on winding up Hypo Alpe Adria is a sign of waning state support said Fitch on Friday. The announcement comes as Standard & Poor’s put the ratings of seven Austrian banks on credit watch negative, leading Commerzbank research to suggest selective Austrian covered bonds could soften.

Royal Bank of Canada opened books on Thursday for its keenly anticipated inaugural covered bond of 2014. The deal builds its euro curve and establishes RBC as the benchmark Canadian issuer in euros. Though wider than its last five year, the 0.75% coupon was 0.5% below its last funding in this duration and shows the impact of the ECB's recent action.

Deutsche Kreditbank (DKB) opened books on Wednesday on an Aa1-rated €500m 10 year mortgage-backed Pfandbrief, its second deal of the year and the third 10 year print to come out of Germany in 2014. A lead banker on the deal described the reception as tepid — a further indication of investor frustration with slender coupons offered by second tier Pfandbrief issuers, particularly on longer tenor bonds.

The European Banking Authority (EBA) believes that the preferential risk weighting for covered bonds is warranted in principle. However as covered bonds issuers can fail, covered bond frameworks should converge to a common standard in certain important areas, and this may need to be implemented within a two year time frame, said the regulator on Tuesday.

Mediobanca was the sole issuer to put its head above the transaction parapet on Tuesday morning following Mario Draghi’s speech on Thursday. Offering a €750m five-year trade to a supply-hungry market, the deal priced at least 3bp through fair value, according to a lead banker on the deal — a clear signal that the periphery tightening story is not over yet.