Euro

UniCredit priced the tightest covered bond since the start of the crisis on Wednesday, achieving the lowest coupon for an Italian covered bond. Waleed El Amir, the bank’s head of long term funding, group finance, spoke to The Cover about the deal.

Raiffeisen-Landesbank Steiermark built a solidly oversubscribed book for only the second 15-year covered bond of the year, enabling leads to price inside guidance in what they said was still an issuers’ market, despite the more volatile macroeconomic backdrop.

Austria’s Raiffeisen-Landesbank Steiermark has mandated leads for its debut mortgage-backed covered bond, a no grow €500m issue that could be launched as early as Wednesday. However, it has yet to decide on maturity, perhaps waiting to see how well other deals are received before making a final call.

Sparebank 1 Boligkreditt opened books for a seven-year €1 billion covered bond backed by prime Norwegian residential mortgages on Tuesday. The deal attracted a granular, but not hugely oversubscribed book, after pricing with a small new issue premium in a busy market.

The new issue covered bond market gathered momentum on Tuesday with two fresh deals, including one from UniCredit which should substantially cut its cost of funding.

Despite the start of a new quarter, investors are not pushing money into covered bonds, secondary market dealers told The Cover on Monday. Bunds have weakened in line with US Treasuries but the rise in yields has not tempted insurance companies to buy bonds. They are waiting for key US employment data due on Friday, which could trigger a further yield hike, before making any move, said bankers.

Deutsche Hypothekenbank took advantage of a ratings lift from Moody’s to launch a €500m seven year mortgage Pfandbrief into a quiet primary market on Monday, despite the uncertain macro-economic backdrop which has caused fixed income volatility.

The Dutch arm of BNP Paribas Personal Finance will begin a roadshow next week for its second ever publicly sold RMBS.

Credit markets are on the back foot but bankers say the outlook for covered bonds is still relatively benign. However, investors are becoming more price sensitive and issuers need to take into account the changed market environment if a mishap is to be avoided, bankers said.

The covered bond pipeline is building with several transactions rumoured, a New Zealand bank on the road and a German issuer on Friday mandating banks for a trade next week.

National Australia Bank returned to the covered bond market on Wednesday to issue the longest dated euro covered bond deal from an Australian issuer. The €750m 12 year is expected to appeal to yield hungry insurance funds with its generous spread pick up to existing long dated Australian deals.

Caja Rural Navarra looks set to price its inaugural €500m five year covered bond at the tight end of guidance on an oversubscribed book. But concerns over absolute yield levels and the less than stellar performance of Cajas Rurales Unidas’s recent deal could spook investors, despite the attractive spread, said bankers.