Euro

Hungary’s government is considering legislation to retroactively alter foreign currency mortgage loans. Mortgage borrowers would then be able to claim cash back from the lending banks, which could have a knock-on effect on covered bondholders. MPs will debate on the law change on Wednesday, but the share price of the country’s OTP Bank has already tumbled on fears that its 2014 profit would be wiped out if the proposal becomes law.

The secondary covered bond market saw modest flows on Friday but dealers reported a stronger bid for core names, in particular long end French deals which have not reacted to downgrades. In contrast, the multi-Cédulas sector remains offered reflecting its large exposures to the recently downgraded Bankia.

Core European covered bonds were supported on Thursday despite recent downgrades. But weaker Spanish names were under pressure on concerns that the European Central Bank could be poised to reconsider the repo treatment of covered bonds relative to ABS. Meanwhile, primary hopes were hit after it emerged that programme documentation delays could cause Canadian Imperial Bank of Commerce (CIBC) to launch its benchmark in September rather than next week.

Canadian Imperial Bank of Commerce (CIBC), which is roadshowing for a euro covered bond, has the potential to price inside last week’s deal for Quebec, bankers told The Cover on Monday. Bankers do not expect covered bond issuance from European banks until the end of August at the earliest. The market has barely reacted to Friday’s downgrade of France by Fitch and in some cases, spreads have actually tightened.

The distinction between Spanish national champion banks and weaker lenders has become even starker, covered bond traders say. Spreads of multi-Cédulas and Cédulas from second tier banks have moved wider on the back of more rating downgrades.

Landesbank Hessen-Thueringen (Helaba) seized on concerted demand for five year paper and a solid market opening on Thursday to price a €500m tap of its outstanding 1% June 2018 bond, paying only a few basis points over secondary levels.

Canadian Imperial Bank of Commerce is set to be the first Canadian bank to issue a deal using the country’s new legislative framework after it mandated banks for what is most likely to be a euro denominated transaction.

Caisse Francaise de Financement Local plans to follow its successfully priced €1bn seven year debut with another benchmark this year.

Caisse Francaise de Financement Local (Caffil) is set to price its debut €1bn seven year Obligation Foncière inside price guidance, after being helped by an improving market backdrop in Europe.

Caisse Francaise de Financement Local(Caffil) mandated banks for its debut Obligations Foncières on Monday afternoon, following a stable market opening. Despite speculation that it planned to issue a 10 year deal, it has opted for a seven year tenor.

Gabriele Minotti, head of funding at Credito Emiliano, spoke to The Cover about the bank’s recent covered bond deal, the roadshow and the focus of investors’ questions .

For too long now issuers have taken investors for granted. But ever since Fed chairman Ben Bernanke warned that he might turn off the printing presses, there’s been a marked shift in the balance of power between buyers and sellers. Even the normally bomb-proof covered bond market is beginning to feel the effects.