Euro

The new issue market is gingerly picking up steam with CIF Euromortgage imminent and Kommunalkredit on the road. Sentiment is positive and has been boosted by a likely strong result for the EFSF deal. That said it’s clear that issuers must continue to offer attractive new issue premiums especially in France, the most prolific of regions so far this year.

Delta Lloyd’s Arena 2011-1, the first European ABS deal of the year, priced at the tight end of guidance on Friday, signalling that the market is ready for more Dutch prime.

A clutch of issuers from outside Europe leapt into the covered bond market across a range of currencies this past week in what was a spectacular display of a sector that is becoming increasingly global.

French issuance continues unabated with Banques Populaires launching its first, and Crédit Agricole its second, covered bond of the year yesterday (Thursday). Both went well, but the sheer size of the order book for Crédit Agricole’s deal surprised many –being the largest so far this year.

HSH Nordbank’s issued 3-1/2 year Pfandbrief on Thursday which, despite competing with other deals in the same part of the curve, benefitted from robust demand from local savings banks, attracting a reasonable oversubscription from these quality buyers.

Books on Dutch mortgage lender Delta Lloyd’s Arena 2011-1 RMBS will close on Friday, according to syndicate bankers managing the sale. Joint leads Rabobank and Royal Bank of Scotland are still waiting for a number of accounts to come in but books are building for the publicly sold senior tranches.

After a slow Wednesday, the European primary market aggressively picked up pace on Thursday with a range of seven deals from six jurisdictions was announced. Many have gone live and all appear to have been readily digested –in large part reflecting the constructive underlying tone to credit markets.

Guidance on Arena 2011-1, the first European RMBS of 2011, will be 105bp-110bp on the A1 notes and 145bp-150bp on the A2s, but deal progress has been slow, as harsher regulatory disclosure requirements start to bite.

The primary market for European bank issued covered bonds appears to be gently slowing with just one deal from France’s Dexia MA pricing yesterday and another from Germany’s Aareal closing books at midday. In contrast a number of transactions are in the works from Canadian and Australian banks across a range of currencies –inaugural deals from new issuers and several rumours of others.

Moody’s expects negative rating actions on covered bonds to substantially outnumber any positive actions in the year ahead, due principally to weakness in the sovereign and banking sectors.

The UK’s Abbey yesterday priced a Eu750m seven year UK regulated covered bond in line with guidance at 150bp over mid swaps. Though ostensibly a smooth book build, those close to the deal said it was far from straightforward, in large part owing to the pricing challenges it faced with respect to its parent company, Santander. Nonetheless, with careful attention to pricing comparables and deal size, a good quality book was successfully achieved.