Euro

The subject of SME-backed covered bonds continues to provoke a sharp division of opinion within the industry. And it was a lively topic at the annual covered bond investor conference, held on Thursday in Frankfurt.

Banca Popolare di Milano’s covered bonds face a ratings cut after Moody's downgraded the bank on Thursday. Although BPM’s bonds will remain investment grade, more and more covered bonds are slipping into triple-B territory, said analysts, though structural enhancements could help stop the slide.

ING priced its tightest ever covered bond this week —inside the French sovereign curve. It demonstrated deep demand at the long end despite low yields, said bankers.

ING Bank offered buyers a rare bite of Dutch covered bond supply on Wednesday and launched the country’s first euro benchmark in nine months.

Aareal Bank brought the covered bond market’s third tap of the week on Wednesday, and priced a €125m increase of a mortgage backed Pfandbrief inside mid-swaps. As investors look for more liquidity German borrowers are finding it harder to drum up demand in the private placement market and taps could take up some of the slack, said bankers.

The Spanish region of Andalucia’s controversial plans to expropriate properties and stop evictions should not affect Cédulas holders, RBS said on Tuesday. Last week the regional government of Andalucia proposed a decree law to temporarily expropriate properties from financial entities if they are about to evict the occupants.

Covered bonds from the periphery widened in the run up to Spain’s 10 year auction, bankers told The Cover on Tuesday, but there was not much selling. Spanish government bond yields widened around 5bp-6bp on Tuesday morning and yields were up nearly 40bp from the start of the month.

Banco Popular Español got the primary covered bond market off to a strong start on Monday after it took advantage of the prevailing demand for higher yielding bonds with a tightly priced tap of its March 2017 bond.

Caja Rural de Navarra has picked joint leads for a roadshow and possible deal. Its announcement late on Wednesday came after Moody’s said that the prospective A3 rated €500m Cédulas was overcollateralised by 623% which will allay negative equity concerns.

Miguel Angel Gadea, head of funding at Cajas Rurales Unidas (Cajamar), spoke to The Cover on Wednesday, following its debut deal as a merged entity. Cajamar, which plans to be a regular issuer, has grown deposits, expects to raise its core capital ratio this year and aims to stabilise its ratio of non-performing loans with a proactive approach to servicing.

Norway’s central bank plans to continue excluding covered bond mortgage subsidiaries from using its lending facility and says the level of asset encumbrance should be linked to the cost of deposit insurance. Analysts said that the news was disappointing for the covered bond market.

Cajas Rurales Unidas (CRU) accessed capital markets for the first time on Tuesday, bringing a €500m three year covered bond. Price discovery was tricky, given the absence of liquid comparable deals.