Euro

German Pfandbrief issuers have pushed primary spreads to record lows, but with minimal hope for secondary performance at such tight levels investors could start to push back on pricing.

Münchener Hypothekenbank made history this week, pricing the tightest ever euro benchmark covered bond. Despite the sub-Euribor level the public sector backed deal drew broad European demand that surprised even the issuer, a spokesman for which told The Cover it intends to return with another benchmark deal later in the year.

Austria’s Raiffeisenlandesbank Niederoesterreich-Wien (RLB NW) sold its inaugural benchmark covered bond on Tuesday, building a four times oversubscribed book for a 10 year mortgage backed trade.

Münchener Hypothekenbank on Monday launched one of the tightest euro benchmarks ever sold and took covered bonds into sub-Euribor territory for the first time in over four years.

The French Ministry of Economy and Finance released a press release on Saturday evening saying that it would guarantee the debt of Caisse Centrale du Credit Immobilier de France (3CIF) and its subsidiary CIF Euromortgage, subject to approval from the European Union and the French Parliament.

UniCredit’s German arm HypoVereinsbank (HVB) returned to the covered bond market for the first time in almost a year on Monday. HVB extended its curve by seven years with a 10 year mortgage Pfandbrief, and divided syndicate bankers with its pricing.

The French government has been forced to guarantee the debt of Credit Immobilier de France after it failed to find a buyer for the mortgage provider.

Deutsche Bank brought the covered bond market to the brink of sub-Euribor pricing on Friday, issuing a €750m eight year mortgage Pfandbrief just a single basis point above mid-swaps. With the secondary squeeze grinding onwards syndicate bankers said it was only a matter of time until the Euribor barrier was broken.

Moody's has assigned a top rating to Landesbank Berlin’s (LBB) Daheim Series 1-2012 structured covered bond, a deal notable for its lack of a Pfandbrief label.

SSA and corporate markets were busy on Tuesday, keeping the primary covered bond quiet. But issuance should improve this week as investors filter back from holiday, said bankers, though they warned that as spreads have tightened a long way in a short time the market may widen after the initial flurry of deals.

Moody’s cut CIF Euromortgage’s covered bonds from triple-A to Aa1 on Tuesday, after lowering the sponsor bank’s senior and short term debt ratings. The Credit Immobilier de France (CIF) group has not yet found a buyer after starting a sale process in June, and though state support is highly likely it remains locked out of the capital market with redemptions approaching.

Germany’s Schuldschein product could be set to develop into a new area, with issuers calling for a secured format.