Euro

Sparkasse KölnBonn is set to announce a deal in the belly of the curve, somewhere in the region of five years, bankers told The Cover on Monday. Other issuers, possibly from Europe’s periphery, are also considering deals, said bankers, after further strong performance in the secondary market.

Nykredit Realkredit launched a euro benchmark junior covered bond on Monday after marketing the deal as a senior secured transaction. This approach helped draw traditional covered bond buyers and credit accounts into the deal, which was priced at half the spread and with twice the orders that its last outing in the rare asset class achieved.

Covered bond issuers decided against bringing benchmark bonds on Friday despite a better backdrop, but there are several potential deals in the pipeline and stronger sentiment should encourage issuers looking to come next week, said bankers.

Turkey’s Akbank could pip Garanti Bank to the post and issue the first euro denominated Turkish covered bond backed by residential mortgage assets. The issuer has been on the road pre-marketing a benchmark sized deal. With a higher rating than many Western European deals, and a market starved of supply, the deal should attract good interest, despite its emerging market label.

After Moody’s downgraded French mortgage guarantor Crédit Logement from Aa2 to Aa3 this week, SG said on Wednesday that a downgrade below single-A would result in a 20% haircut to the value of the mortgage loan collateral it guarantees.

Nykredit announced a benchmark junior covered bond mandate on Wednesday, just a day after Standard & Poor’s warned that Danish covered bond ratings could become increasingly reliant on the junior asset class.

Austria’s Vorarlberger Landes-und Hypothekenbank (Vorarlberger Hypo) made its mortgage Pfandbrief debut on Tuesday, selling a tightly priced seven year bond and taking supply in that maturity to over €4bn in only a week.

HypoVereinsbank (HVB) closed a €500m seven year mortgage Pfandbrief on Monday after opting for a more generous starting point than those on recent German deals. It was rewarded with a far larger orderbook, which allowed it to price the bond well inside initial price thoughts.

Crédit Mutuel CIC sold its first covered bond of 2013 and its first euro benchmark in over a year on Monday, launching a €1.25bn seven year transaction flat to its own curve.

Covered bond syndicate officials are predicting as many as five deals will be launched next week following a wave of successful core transactions.

The quiet period for FIG ended this week with a handful of deals emerging in the covered bond and senior unsecured markets. And in contrast to several tightly priced core European deals seen earlier this year, in which investors had pushed back on terms seen as too aggressive, bankers are now reporting a shift in sentiment.

Two leading covered bond investors based in Germany have told The Cover why they are investing, despite record low yields, and what strategic shifts they are pursuing.