Euro

Banca Carige has mandated leads for a potential euro-denominated covered bond (Obbligazioni Bancarie Garantite) benchmark transaction, which could be launched on Thursday just as the US debt ceiling deadline falls due.

Despite the close proximity of the US debt deadline on Thursday, the covered bond market was stable and well supported on Tuesday, said bankers, who are waiting for imminent deal mandates from Austria and Italy.

This week’s three Italian covered bond issues continued to outperform in secondary trading on Friday while the primary market paused for breath. Meanwhile, Moody’s has put Credito Emiliano’s mortgage covered bonds on review for downgrade, highlighting the benefits of smaller Italian banks coming to market before further rating moves.

Two issuers succeeded with covered bond debuts on Thursday. Mediobanca’s choice of a 10 year maturity for its inaugural deal was vindicated when it priced a €1bn benchmark comfortably inside guidance, while Commerzbank’s first foray into the mortgage Pfandbrief market enjoyed the smooth execution expected of a leading German bank.

Italy’s Mediobanca decided not to press ahead with a covered bond debut on Wednesday as the Republic of Italy launched a seven year BTP on the same day. Instead the issuer is expected to launch a deal targeting the mid to long end of the curve on Thursday, when it is likely to be joined by Commerzbank, which has mandated for a seven year mortgage Pfandbrief.

Commerzbank plans to issue a seven year mortgage Pfandbrief on Thursday, in its first mortgage-backed deal not issued from Eurohypo’s programme.

Moody’s has assigned a triple A rating to the €199m of commercial mortgage back Pfandbriefe issued by NATIXIS Pfandbriefbank AG.

Spain’s new export finance covered bonds, Bonos de Internacionalización (BI), have a weaker credit profile than existing export finance covered bonds but greater flexibility, Moody’s said this week. The Spanish authorities’ introduction of the new bonds comes as they work to improve the efficiency of covered bonds as a funding tool.

The covered bond market continued to trade on a stable footing on Monday, even though the US could technically default in less than two weeks. Italy’s UBI Banca successfully priced a €1.25bn deal on a comfortably oversubscribed and granular book, at a very competitive spread.

UBI Banca is set to make a return to the covered bond market for the first time in two and a half years. After mandating leads for a benchmark euro deal on Friday, books are expected to open on Monday

The strong reception NIBC encountered for its conditional pass-through covered bond from traditional covered bond investors pays testimony to its regulatory endorsement from the Dutch central bank. This approval gave the product a much wider appeal than was initially expected, suggesting there is scope for a broader range of issuers to consider this structure than was first thought.

The European Banking Authority (EBA) on Monday published the final draft of its Regulatory Technical Standards (RTS) on close correspondence between the fair value of an institution's covered bonds and the fair value of its assets. The document will put an end to an accounting trick that allowed banks to make their capital position appear better than it was.