Euro

Though primary market activity remains muted, the pipeline continues to grow despite headline risk. A string of mandates for US dollar deals are expected, along with a sterling transaction from Barclays.

Spain’s La Caixa has issued its second deal of the year, with several players, including the leads, conceding pricing was quite tight. Nevertheless, with market sentiment remaining strong, there was little sensitivity in the book and the deal worked. Elsewhere CM-CIC priced the first 10-year for several weeks as Banca MPS and Unicaja opened books.

Obtaining funding for a single-A rated entity from a peripheral jurisdiction was never going to be a stroll in the park — in senior unsecured it has, at times this year, been impossible. Italy’s Banco Popolare raised Eu1.25bn from a 4.75 March 2016 issue via Banca Aletti, BNP Paribas, Goldman Sachs, RBS and UBS on Tuesday, showing how strategically important the covered bond market is, not just for the issuer, but for the health of the entire banking system.

The primary market has got off to a very strong start, with books building on as many as four deals across four jurisdictions. The transactions, which include two tier two borrowers from peripheral markets, have attracted a total of 440 orders worth a combined Eu8bn. The strong showing bodes well for new peripheral tier two borrowers who are said to be lining up with deals this week.

Spanish and Italian banks are expected to take advantage of the bid for peripheral covered bonds, as witnessed last week by the strength of demand in Banca Carige’s trade, two taps from peripheral issuers and Santander’s blow-out deal. La Caixa has mandated for a four year as other Spanish borrowers line up and Italy's Banco Popolare has mandated.

After what has been a relatively busy week for covered bonds, the primary market has come to a standstill as market participants look to the week ahead in anticipation of what might be in store. Secondary market traders continue to see a strong interest in peripheral European bonds, which was to some extent reflected by the successful Bankinter and Banca Popolare Di Milano taps on Wednesday, along with the warm reception Banca Carige encountered for its Eu500m benchmark on Thursday.

Danske Bank opened and closed books in quick succession on Wednesday for the inaugural deal off its cover pool C programme which mixes both commercial and residential mortgages.

The book for Santander’s Eu2bn 4-year cédulas hipotecarias was swelled, once again, by demand from UK credit accounts on Monday. One of the leads dismissed talk of order inflation, and confirmed that eight of the top 10 accounts usually expect to be filled in full. Danske is due with its first mixed commercial and residential backed deal later on Tuesday, or Wednesday, and Clydesdale is back in focus.

The books on ING Bank’s five year covered bond closed at 11:45am UK time. Being the only deal in the market gave it exclusive status and it drew Eu2.25bn of orders from over 100 accounts.

Westpac New Zealand postponed its inaugural euro benchmark covered bond on Tuesday, following a devastating earthquake in the south of New Zealand.