Euro

Amendments, adopted this week, to Germany’s Pfandbrief Act that increase transparency are positive for investors but there will be no ratings impact from the Article 28 changes, said Fitch.

SNS Bank returned to the covered bond market on Thursday for the first time in almost two years, having aborted a deal earlier in the year. The issuer enjoyed a strong reception for its second attempt at a €1bn five year trade, which offered a double digit new issue premium and a huge pick up over Dutch peers ABN Amro and ING.

This week’s two covered bond deals have helped increased activity in secondary markets, traders told The Cover. There has been selling pressure in the senior unsecured but this has only translated to more mixed flow in covered bonds.

Sparebank 1 Boligkreditt sold its third covered bond benchmark of the year this week. It has launched trades in euros, dollars, Norwegian kroner, and is monitoring the growing sterling and Australian dollar markets, chief executive Arve Austestad told The Cover.

Covered bond issuers proved reluctant to follow ING’s lead and launch trades on Tuesday, as activity shifted to the senior market. But given the strong reception for secured issuance syndicate bankers remain confident of supply later in the week.

ING helped restart the market once again on Monday, launching the first benchmark from core Europe in almost a month. Despite an unusual eight year tenor buyers flocked to take down fresh supply, placing €3.5bn in orders for only the fourth Dutch benchmark of 2012.

Sparebank 1 Boligkreditt on Monday returned to the euro market for the first time since January. The rare borrower priced a five 1/2 year benchmark many times cheaper than where it sold a longer trade at the start of the year, exemplifying the sustained tightening in core covered spreads.

The covered bond market is gearing up to restart next week, said syndicate bankers, who expect at least two benchmark trades to hit the screens. German and Scandinavian borrowers are tipped as the most likely candidates to take advantage of squeezed secondary levels. But with no end to spread contraction in sight, the urge to wait and watch levels grind tighter could cause some borrowers to hold off.

After the drama and excitement of UniCredit pricing through BTPs, the European covered bond market has returned to normal — only to be outshone by senior unsecured, where three deals are on the way.

Intesa Sanpaolo was the most likely candidate to follow UniCredit’s groundbreaking €750m reopener, but could face an even higher spread, investors told The Cover on Wednesday. Italy also represents the only hope for peripheral supply in the short term, as Spain remains priced out of the primary.

UniCredit has rewritten the rulebook this week by pricing a covered bond 100bp tighter than where the Republic of Italy can fund itself. But, other than Intesa Sanpaolo, it is unlikely any other issuer could follow suit.

UniCredit drew a stellar reception for the first Italian benchmark in almost a year on Tuesday, with the vote of confidence for peripheral risk raising hopes for follow on trades from Italian and Spanish names.