Euro

Despite hopes that the result of Spain’s general election would bolster sagging equities and pull in widening government bond yields, market conditions appear prohibitive at the start of a potentially shortened week.

UniCredit has overhauled its funding strategy to insulate itself from hostile wholesale markets, its head of funding said this week. With the senior unsecured market shut even for top tier issuers, the bank announced a new funding strategy for 2013-2015 with an “embedded” policy of no issuance in senior unsecured.

RBS braved a hostile market to price the second euro benchmark of the week on Wednesday. Strong domestic and offshore demand made up for a minimal German bid, ensuring a solid €750m print.

European covered bond markets continue to look in poor shape as the macro sovereign backdrop dramatically deteriorates. This suggests that Commonwealth Bank of Australia’s euro denominated benchmark is likely to remain on hold for the time being. But that should not delay Westpac, which is planning to open books on Thursday afternoon.

Australia and New Zealand Banking Group priced the first Australian covered bond on Tuesday, launching a benchmark dollar trade that attracted broad demand and a healthy level of oversubscription. Meanwhile RBS has opened books on the week’s second euro benchmark, though given the jurisdictions concerned CBPP2 remains unable to support the primary market.

Sparebank 1 Boligkreditt plumbed the safe haven bid for Norwegian assets, braving turbulent markets to issue a €1bn five year, which was priced at the tight end of guidance with a modest new issue premium.

The race to issue Australia’s first covered bond deal took an unexpected twist today as it emerged that the frontrunner, National Australia Bank, will fall into line with the other three Australian issuers and introduce indexation into its programme. ANZ has moved to the fore, announcing that it will open books for a US benchmark deal next week – by which time NAB’s final documentation should be ready. But whether ANZ will in fact take the glory, is not assured. Commonwealth Bank of Australia could be poised to make an announcement soon.

Cold shouldered by international capital markets, Italian covered bond issuers are increasingly turning to the ECB and domestic retail investors to backstop their funding amid a threats of a sovereign meltdown.

The euro covered bond market has begun to show signs of life, a full five trading days after the formal start of the ECB purchase programme. Crédit Mutuel Arkéa will price a rare dual tranche tap later on Wednesday.

News of the ECB’s latest covered bond purchase programme has failed to move secondary spreads, analysts and syndicate officials told The Cover on Monday. Meanwhile the situation in peripheral jurisdictions continues to deteriorate, making the programme’s success all the more contingent upon concrete political resolution in the individual countries, and Europe as a whole.

For the first time in many months, the RMBS market looks set for potentially greater issuance than the covered bond market this week as two issuers are preparing benchmark transactions. Rabobank, which is also out with a tier one hybrid deal today, is also planning on a dual tranche prime RMBS through its Obvion subsidiary. Meanwhile, Barclays, which has been out of the RMBS market for four years, is embarking on a US and UK roadshow for an RMBS issued from its Gracechurch platform.

Activity has once again shifted into dollars, with European investors paralysed by a lack of detail on the upcoming ECB covered bond purchase programme and a resolution of the sovereign debt crisis. Meanwhile Canadian banks issue dollar deals with ease, and Australia’s big four could be swayed into taking the same route for their respective debuts, said syndicate officials.