Euro

The four euro benchmarks that were priced this week are mostly trading slightly tighter in the secondary market, despite being priced with very small new issue premiums. Along with a period of benign macroeconomic news, the negative net supply of euro benchmarks in 2013 has created a particularly supportive backdrop for new issues, according to covered bond bankers.

The resumption of post-summer covered bond supply continued on Thursday, including the first issue out of peripheral Europe. UniCredit’s €1bn seven year was priced at the tight end of guidance, while Belgian bank KBC also tapped the market for a €750m three year that was well received, confirming the window for issuance remains wide open.

Deutsche Pfandbriefbank priced its fourth covered bond of the year, a no grow €500m five year, only 2bp above its outstanding curve on Wednesday, mimicking the tight pricing in Nordea Bank Finland’s five year trade a day earlier.

Nordea Bank Finland attracted more than €3bn of orders for its five year benchmark on Tuesday morning in what was the first piece of supply from a European issuer since July.

Sparebanken Vest Boligkreditt and Nordea have respectively mandated leads for a roadshow and a deal and another deal from Spain this week has not been ruled out.

Investors should consider switching out of the senior unsecured debt issued by Abbey National and Lloyds Banking Group and buying their covered bonds, said Barclays on Friday. The scarcity of supply in both asset classes has driven a technical tightening which, the analysts say, is not fundamentally justified.

Vakifbank is yet to mandate banks for its next Eurobond deal, but is “working closely” with Unicredit and Natixis to bring what could be Turkey’s first ever mortgage-backed covered bond transaction, said a funding official at the borrower. Those banks have not been officially mandated for the covered bond.

Bunds fell further on Thursday following stronger than expected growth data from France and Germany. But in contrast to the last time yields were at current levels, credit spreads were much wider. Though funding conditions have never looked better, issuers are in no hurry to bring deals, bankers told The Cover.

Standard & Poor's has assigned a preliminary triple-A rating to the inaugural €10bn medium term covered bond programme of La Banque Postale Home Loan Obligations de Financement de l'Habitat. Having roadshowed in July, it is poised to take advantage of strong market conditions by pricing its first transaction in the near future.

The Danish auction season kicks off this week with Nykredit’s scheduled to start on Thursday and the other Danish banks expected to follow. The auctions will be notable for offering a new type of longer dated product that should help to address rating agency concerns over asset liability mismatches and help fulfil Basel III’s Net Stable Funding Ratio.

Münchener Hypothekenbank priced a €250m tap of its July 2028 on Wednesday with demand driven by reverse enquiry and short positions among dealers. Despite a lacklustre launch, the rarity of the name and this tenor suggested it would always perform well and Wednesday’s tap proved just that.

Berlin-Hannoversche Hypothekenbank sold a €250m long three year Pfandbrief in floating rate format on Monday, in a deal that was largely distributed among the savings bank networks of lead managers Norddeutsche Landesbank and WGZ Bank.