Euro

Portuguese and Spanish issuers, Caixa Geral de Depósitos and Banco Mare Nostrum launched deals on Wednesday that, despite being aggressively priced, were heavily oversubscribed. The deals showed demand is clearly skewed to higher yielding credits, boding well for second and third tier peripheral issuers who are looking to cut central bank funding dependence.

The year’s first batch of covered bond issues have been easily absorbed by a wide range of investors producing comfortably oversubscribed books. The first peripheral deal mandate has come from Portugal and another from Spain is expected shortly.

Four issuers from Finland, France, Australia and the UK are set to price covered bonds on Tuesday and Wednesday. Market conditions are broadly constructive, especially for higher yielding names, said bankers, but core issuers might have to offer concessions to tempt investors in a busy start to the year.

Changes to Italy’s covered bond law improve the segregation of cover pool assets and are good for the market, according to Moody’s.

A better macroeconomic outlook and more transparency were two reasons why Moody’s chose to upgrade the ratings of a dozen Spanish covered bond programmes. The move presages spread tightening in the New Year when liquidity returns, traders said on Monday, with second tier Spanish covered bond programmes set to move closer to those of the country’s national champions.

ABN Amro has become the second bank this year to remove a clause in its covered bond documentation that, in an issuer insolvency, stipulated pro-rata distribution of overcollateralisation to cover asset-liability mismatches for maturing bonds. As a result, the bank has lowered the amount of OC needed for a triple-A rating, making its programme more collateral efficient.

National Bank of Canada is still deciding when to launch a covered bond in euros, with bankers insisting there is enough liquidity for deals this week, though they conceded that very few issuers are under any pressure to pull the trigger.

Spain is set to follow Turkey and become the second country with a legal framework for issuing bonds backed by SME loans, according to BBVA CIB research.

ING Belgium made a successful covered bond debut on Tuesday, attracting a heavily oversubscribed order book for the €1bn five year trade.

Bracingly tight spreads for outstanding Pfandbriefe from top tier issuers meant the book build for Landesbank Hessen-Thueringen’s (Helaba) €750m four year bond was quite slow on Tuesday, even after it offered a concession to secondary levels.

ING Belgium will finish its roadshow on Friday and National Bank of Canada is set to emerge from blackout next week, increasing the chances of two or three new covered bond deals next week. Primary market conditions remain strong, despite modest profit taking, said bankers on Thursday.

A successful €3bn share issue from Banca Monte dei Paschi de Siena early next year could bolster the bank’s underperforming covered bonds, RBS research said on Wednesday. It could also lift sentiment for the wider Italian covered bond market, helping other smaller Italian issuers such as Banca Carige, which is also looking to raise capital.