Euro

Deutsche Pfandbriefbank (Pbb) launched a €100m three year floating rate Pfandbrief on Tuesday, but syndicate bankers are sceptical that the euro market will manage much more before Easter. The storm around Cyprus may have subsided, but it has reminded issuers how quickly markets can turn and highlighted the value of covered bond collateral.

Multi-Cédulas came under pressure in the secondary market on Monday after Standard & Poor’s took rating action on 51 classes totalling almost €100bn late last week.

Interest only mortgage loans could destabilise an already stressed Danish housing market, Standard & Poor’s said on Monday.

Crédit Agricole Home Loan SFH was the only borrower to visit the euro covered bond market this week. The issuer sold a €250m tap of a 12 year bond, although syndicate bankers disagreed over the premium the increase offered relative to OATs and the original deal.

Italian covered bond spreads held firm following a round of Fitch downgrades, which came after the rating agency tightened the link between issuer and covered bond ratings in the country.

High redemptions, combined with deleveraging and a drive towards deposit funding has put net first quarter covered bond supply in 2013 on track to hit record lows, said Barclays analysts on Thursday.

Overcollateralisation should not be the main factor when rating agencies assess covered bonds, according to Commerzbank.

Core and peripheral borrowers are waiting for a better market before bringing benchmark covered bonds. Safe-haven names are traditionally first to take advantage of returning stability. But southern European borrowers, which offer higher yields, juicers spreads and are less flexible over pricing, will find execution easier, said bankers.

Trading in Spanish and Italian covered bonds was relatively stable against asset swaps on Monday, while they tightened versus their domestic sovereign bonds, following the news that Cyprus faces a bail-out from the European Union.

Cédulas Hipotecarias could be hit by a European Union ruling on Spanish mortgage enforcement, according to ratings agency DBRS. The ruling increases the chance of borrowers contesting mortgage enforcement proceedings and this could increase the already lengthy foreclosure period, it said.

Vorarlberger Landes- und Hypothekenbank (Vorarlberger Hypobank) has picked banks to manage its first euro benchmark covered bond, which it plans to launch in mid-April, a funding official at the issuer told The Cover.

Bank of Ireland priced a hugely successful €500m five year transaction on Friday, bringing its longest benchmark covered bond in over three years and radically repricing its curve relative to the Irish sovereign.