Euro

Deutsche Kreditbank has mandated leads for its second deal of the year and the third 10 year issued from Germany this year. Meanwhile, there is speculation that several Canadian issuers could return to the euro market.

While markets on the continent were closed for business on Monday due to public holidays, syndicate bankers in London were planning a busy week ahead. With a broadly positive reaction to European Central Bank president Mario Draghi’s Thursday speech seen across credit markets into the end of last week, conditions remain strong for primary issuance. On Friday the iTraxx Senior index closed 8bp tighter to a new post-2008 low of 60bp. The pipeline could include deals from Westpac New Zealand and Caisse Centrale Desjardins du Quebec.

Veneto Banca has issued its second RMBS in as many months, while Banca Sella was set to price its first RMBS deal since 2005 on Friday. The short dated single A rated deals, that offered a compelling triple digit spread, will give covered bonds a run for their money for investors that understand the risk.

Two of the strongest RMBS platforms in the European securitization market hit the market this week, and showed investors are still eager to grab the highest quality paper.

Moody’s released its quarterly treasure trove of covered bond rating trend analysis in ‘Global Covered Bonds Monitoring Overview: Q4 2013’ this week. The agency identified a widespread increase in timely payment indicators (TPIs) for covered bond programmes in countries with a sovereign rating of A1 and below as the key trend.

Covered bond secondary markets opened on a much firmer footing on Friday, with dealers and clients singling out higher yielding weaker credits, particularly in the periphery, where offers are hard to find. The move came after Thursday’s stimulus package from the European Central Bank, and after Standard and Poor’s upgraded several Spanish banks.

With rate cuts and targeted asset purchases already priced into markets, bankers fear the European Central Bank will under-deliver on promises of market stimulus at Thursday’s meeting and trigger a fixed income sell-off. However, this will present a buying opportunity for covered bond investors, bankers told The Cover. Commonwealth Bank of Australia has issued a five year dollar benchmark.

Yorkshire Building Society issued its first euro issuance in four years on Wednesday morning, a deal that bankers said offered a generous spread to fellow UK names.

OP Mortgage Bank returned for the second time this year on Wednesday to issue a €1bn five year covered bond. Though it was the tightest spread for a Finnish transaction seen in the last five years and priced with a negligible new issue premium, it still attracted a robust level of oversubscription.

BBVA returned to the covered bond market for the first time in over a year on Wednesday with a 10 year Cédulas that attracted a fairly granular book. The coupon paid was the lowest ever for a 10 year in the history of the Spanish Cedulas market.

Banco Santander Totta surprised the market on Tuesday, announcing a mandate and setting initial price thoughts for a new five year benchmark of undetermined size.

The widely anticipated public sector-backed Pfandbrief from Dexia Kommunalbank on Tuesday had been expected to go well, given the juicy spread that was likely. But the level of oversubscription was the highest of any German deal this year and even put competing issuance from Portugal into the shade.