Euro

The Italian bankers association (ABI) conference kicked off in Milan on Wednesday, where participants discussed the new OBG framework and considered ways to induce SME lending with reference to the newly proposed Obbligazioni Bancarie Collateralizzate framework and the ABS market.

The covered bond market was in good shape on Wednesday as bankers reported renewed interest in peripheral names and the multi-Cédulas sector. The primary market is expected to pick up next week as Scandinavian and German issuers line up.

Credit sentiment is positive, and it seems unlikely that the European Central Bank would take anything other than an accommodative stance at next week’s policy meeting, but bankers are getting cautious that valuations are becoming overstretched, particularly in those markets which have until now been considered safe havens.

After issuing its second covered bond of the year on Tuesday, Crédit Foncier de France is set to return to the capital markets and fund its residential mortgages with an RMBS, the first sale of the product from France since 2006. But in contrast to covered bonds, the RMBS is driven by capital considerations with the leads confirming that the issuer intends to place all of the subordinated notes.

The Bank of Montreal (BMO) became the sixth Canadian bank to issue legislative covered bonds when it opened books for its first legislative deal on Tuesday. The transaction was priced at the tight end of the range of Canadian deals and encountered some price sensitivity but was still comfortably oversubscribed.

Compagnie de Financement Foncier (CFF) came to market with its second Obligation Foncière of the year on Tuesday, matching the March deal’s €1bn size but this time opting for a 10 year, rather than five year, tenor.

The recent correction lower in Multi-Cédulas following Standard & Poor’s rating downgrades last week has almost run its course. Though there is a slight risk that month-end portfolio re-balancing will provoke further near-term losses, the longer range picture is fundamentally and technically well supported, bankers told The Cover on Wednesday.

The new Banque de France SME funding vehicle could be used for ECB quantitative easing, says BBVA. The Spanish bank’s research team say that, given the ECB’s new readiness to fund SME assets through QE, the Banque de France programme could be the ideal vehicle to channel these funds.

Bank of Montreal’s (BMO) covered bond programme was recently signed off by the Canadian Mortgage Housing Corporation (CMHC), giving rise to speculation that it could return to the covered bond market after Easter with a newly set up programme and a legally compliant covered bond deal. A still-favourable cross currency swap suggests it could become the fourth Canadian bank to issue in euros this year.

Deutsche Postbank AG announced it has entered into a voluntary commitment to maintain nominal overcollateralisation (OC) of its mortgage cover pool above the statutory legal minimum. The commitment was triggered by Fitch’s negative rating action on its covered bonds, which will quickly be remedied, the agency told The Cover. However, whether voluntary overcollateralisation will be there for investors in the event of an issuer’s insolvency under new regulatory arrangements is an open question.

Société Générale returned to the covered bond market on Tuesday after a four month absence to issue the sixth French covered bond deal of the year and the third from France with a 10 year maturity. By limiting the deal size, leads were able to price flat to its curve, and with barely any premium to the French government.

After mandating leads for a roadshow at the end of March, Berlin Hypothekenbank (BHH) opened books on Monday for what bankers believe could be the one and only covered bond issue of the week. Though the deal had been widely anticipated, bankers said Ukrainian headline risk could have derailed timing.