Euro

Finland’s OP Mortgage Bank has closed books on the second Finnish covered bond of 2011, a Eu1bn five year benchmark deal, on Wednesday.

AXA Bank Europe will price a Eu500m no grow issue at 63bp over mid-swaps later on Tuesday, via leads Bank of America Merrill Lynch, BNP Paribas, Crédit Agricole, HSBC, Natixis, and Société Générale.

Banco Espanol de Crédito sold a Eu600m no grow issue off the back of one of the borrowers largest ever order books on Monday.

Banco Bilbao Vizcaya Argentaria priced the lowest yielding covered bond from a Spanish issuer in the last year on Monday.

The stream of Scandinavian borrowers pricing US dollar denominated covered bonds is continuing, as Moody’s assigned a rating to a Nordea’s new programme and Swedbank priced a dual tranche deal. Other Scandinavians are set to follow.

Twin Spanish mandates in four year maturities from Banco Bilbao Vizcaya Argentaria and Banco Espanol de Credito, opened the market on Monday, after a week with scant primary activity, though strong secondary trading in cédulas.

The torrent of Spanish issuance so far in 2011 has confounded many analysts’ estimations. They predicted it would begin in earnest after Q1, as Spanish covered bond redemptions will reach a record high of Eu22.4bn this year, with the majority occurring in the second and fourth quarters.

US dollar denominated covered bond issuance is set for growth, as demand is far outpacing supply, regardless of whether a US law is put a law in place, and European issuers are lining up deals for launch. Funding executives from many institutions explained their strategies at the 3rd Euromoney US Covered Bond Investor Forum on Wednesday this week.

The absence of primary flow has resulted in a better bid for higher yielding secondary paper. A few large orders have driven BBVA three year paper in by as much at 75bp from launch levels and, with the spread to second and third tier Spanish banks widening, demand has moved down the credit curve. Despite event risk over Japan, there is talk that a French and Spanish bank, not seen this year, could be poised to issue.

Around 400 investors, issuers and bankers congregated at The Pierre hotel in New York this week for the third Euromoney US covered bond investor forum. The conference got off to an auspicious start, held just a week after the US Covered Bond Act 2011 was introduced in the House of Representatives. On the same day, Senator Charles Schumer announced that he would introduce legislation in the Senate.

Despite widespread market volatility and risk aversion, the covered market has remained active, though distinctly muted. Berlin Hannoversche Hypothekenbank sold a mortgage backed jumbo Pfandbrief transaction on Tuesday, and on Wednesday taps from French issuers CM-CIC and CRH were launched.

Uncertainty as to the full effect of Japan’s earthquake has prompted widespread risk aversion among investors, and allowed Berlin Hannoversche Hypothekenbank to have the market to itself on Tuesday.