Euro

Sweden’s Länsförsäkringar Hypotek returned to covered bonds on Monday, after almost two years away from the market. Its rarity and top quality collateral ensured conclusive investor endorsement, despite competing Spanish supply.

Core issuers planning benchmark covered bonds are eyeing the euro and dollar markets, said bankers on Friday. And although the peripheral rally has slowed, the prospect of an ECB interest rate cut should help support appetite for southern European supply.

Swedbank Hypotek wasted little time in moving from blackout to benchmark this week, and launched its first euro jumbo covered bond since 2011 on Thursday. Other Nordics are emerging from reporting periods and at least one also has an eye on a euro transaction, said bankers.

The shipping crisis will last longer than expected and is keeping German banks in particular under pressure, Fitch said on Thursday.

Moody’s downgrade of Commerzbank and Hypothekenbank Frankfurt (Hypfra) will leave Commerzbank’s covered bonds unscathed but push Hypfra’s public sector bonds down to Aa2, analysts said on Wednesday.

Sparkasse KölnBonn returned to covered bonds in style on Tuesday, breaking through into the single digits over mid-swaps for its first benchmark deal in five years.

Hard work rather than a change in terminology led to the surge in interest for Nykredit Realkredit’s latest senior secured deal, an official at the issuer told The Cover on Tuesday. Almost 140 accounts produced its biggest order book yet for a senior secured deal.

Sparkasse KölnBonn is set to announce a deal in the belly of the curve, somewhere in the region of five years, bankers told The Cover on Monday. Other issuers, possibly from Europe’s periphery, are also considering deals, said bankers, after further strong performance in the secondary market.

Nykredit Realkredit launched a euro benchmark junior covered bond on Monday after marketing the deal as a senior secured transaction. This approach helped draw traditional covered bond buyers and credit accounts into the deal, which was priced at half the spread and with twice the orders that its last outing in the rare asset class achieved.

Covered bond issuers decided against bringing benchmark bonds on Friday despite a better backdrop, but there are several potential deals in the pipeline and stronger sentiment should encourage issuers looking to come next week, said bankers.

Turkey’s Akbank could pip Garanti Bank to the post and issue the first euro denominated Turkish covered bond backed by residential mortgage assets. The issuer has been on the road pre-marketing a benchmark sized deal. With a higher rating than many Western European deals, and a market starved of supply, the deal should attract good interest, despite its emerging market label.

After Moody’s downgraded French mortgage guarantor Crédit Logement from Aa2 to Aa3 this week, SG said on Wednesday that a downgrade below single-A would result in a 20% haircut to the value of the mortgage loan collateral it guarantees.