Euro

Despite the start of a new quarter, investors are not pushing money into covered bonds, secondary market dealers told The Cover on Monday. Bunds have weakened in line with US Treasuries but the rise in yields has not tempted insurance companies to buy bonds. They are waiting for key US employment data due on Friday, which could trigger a further yield hike, before making any move, said bankers.

Deutsche Hypothekenbank took advantage of a ratings lift from Moody’s to launch a €500m seven year mortgage Pfandbrief into a quiet primary market on Monday, despite the uncertain macro-economic backdrop which has caused fixed income volatility.

The Dutch arm of BNP Paribas Personal Finance will begin a roadshow next week for its second ever publicly sold RMBS.

Credit markets are on the back foot but bankers say the outlook for covered bonds is still relatively benign. However, investors are becoming more price sensitive and issuers need to take into account the changed market environment if a mishap is to be avoided, bankers said.

The covered bond pipeline is building with several transactions rumoured, a New Zealand bank on the road and a German issuer on Friday mandating banks for a trade next week.

National Australia Bank returned to the covered bond market on Wednesday to issue the longest dated euro covered bond deal from an Australian issuer. The €750m 12 year is expected to appeal to yield hungry insurance funds with its generous spread pick up to existing long dated Australian deals.

Caja Rural Navarra looks set to price its inaugural €500m five year covered bond at the tight end of guidance on an oversubscribed book. But concerns over absolute yield levels and the less than stellar performance of Cajas Rurales Unidas’s recent deal could spook investors, despite the attractive spread, said bankers.

Crédit Agricole SCF returned to the covered bond market for the second time this year with its second ever public sector backed deal. The €1bn 10 year transaction priced through the OAT, which was the first time in the history of the French covered bond market.

The Bank of international Settlements has suggested that local regulators may seek to limit the level of balance sheet encumbrance by linking it to the level of capital that a bank needs to hold.

Belfius Bank on Tuesday followed the footsteps of KBC bank, mandating and launching a seven year mortgage backed covered bond with pricing being closer to its Belgian peer than any previous funding. Deutsche Pfandbriefbank also reopened its March 2020 for an attractively priced €250m tap.

Holidays in Germany and the UK next week shrink the issuance window but covered bond bankers still expect benchmark deals. A seven year tenor makes for simple execution, but Deutsche Pfandbriefbank’s (Pbb) 15 year bond has captured issuers’ imaginations, said syndicate officials.

Deutsche Pfandbriefbank (Pbb) returned to the public sector Pfandbrief market in style this week. It extended the German covered bond curve with an impressive 15 year deal and plans to issue at least one public sector backed bond a year, it told The Cover.