Euro

ANZ National built a benchmark sized orderbook for a €250m tap of its inaugural euro covered bond on Tuesday and priced the deal inside its outstanding curve. With some buyers sidelined due to a lack of a legislative framework in New Zealand, the strong reception bodes well for an issuer intending to launch yearly euro trades.

The inaugural public benchmark from Spain’s Bankia boasted the highest spread and shortest tenor of any deal this year. It now plans to return with a longer dated trade, building on the strong demand it found for Wednesday’s deal.

Deutsche Bank pulled in more than €2bn of orders for the third German Pfandbrief of 2012. Leads priced the €500m no grow trade at 22bp on Wednesday, making it the tightest trade of the year so far, and the bond tightened further in the secondary market on Thursday.

The tightest and widest transactions of 2012 were priced on Wednesday, with Bankia launching a two year Cédulas at 290bp over mid-swaps, while Deutsche Bank priced a blow-out seven year trade at 22bp over mid-swaps.

Bankia restarted primary supply on Wednesday, opening books on a two year €500m trade that could easily have been increased on the back of strong demand, according to syndicate leads. Though the settlement date means the bonds cannot be used in the second Long Term Refinancing Operation, the deal still attracted interest from across the Eurozone. As the lowest rated issuer to tap the covered bond market this year, Bankia’s success could prompt other lower tier names to follow.

Nykredit will begin the first Danish auction of 2012 later this month, selling an estimated Dkr115bn (€15.4bn) between February 27 and March 12. The traditional one year adjustable rate mortgage bonds will make up the bulk of the auction, though with the low yield environment borrowers have moved along the curve.

Market sentiment has begun to weaken while the Greek sovereign’s future remains uncertain. The mood has hurt the secondary performance of recent trades across several asset classes, including Barclays’ €2bn five year covered bond which was launched on Wednesday.

Barclays Capital shrugged off sovereign rating action and the possibility of a Greek default to launch a well oversubscribed euro benchmark on Wednesday. The covered bond market remains technically well supported despite negative headlines, and syndicate bankers still expect issuance to move down the credit curve as blackout periods end.

Spain’s Bankinter and Bankia are expected to launch short dated trades later this week, after the primary market paused for breath on Monday. Cash rich investors with an appetite for risk should ensure they get a strong reception, but negative rating action could yet cause them to hold off.

The bullish market was again in evidence at the end of last week after CFF issued a €2bn August 2015 at mid-swaps plus 95bp on Friday. Though this was flat to its curve, the borrower attracted a €7bn book from about 270 investors.

Compagnie de Financement Foncier built one of the largest ever orderbooks for a French issuer on Friday, pricing a €2bn 3 1/2 year trade flat to its outstanding curve. Short end trades have flown regardless of name or jurisdiction, and syndicate banks said reverse enquiry for Italian borrowers has now started to build.

In little over a week five Spanish banks have attracted over €17bn of demand from 847 investors, enabling them to raise a collective €6.7bn. Not bad for a market that was closed just a few weeks ago — and well beyond the wildest expectations.