Euro

Intesa Sanpaolo has taken a step towards covered bond issuance, signing a contract to transfer Eu8bn of residential mortgages into a special purpose vehicle to issue MBS that are expected to be used as collateral for covered bonds this year.

Caisse de Refinancement de l’Habitat only launched its first true jumbo six months ago, but this year has been the biggest issuer of benchmarks in the covered bond market. The Cover spoke to chairman and CEO Henry Raymond about the issuer’s new profile and strategy, and how the growing number of French covered bond issuers will affect their use of CRH.

With the primary market shut to new issues tap dancing looks set to come back into fashion. Dexia Municipal Agency and Münchener Hypothekenbank have led the revival over the last week, with both increasing outstanding public sector deals.

Bank of Ireland Mortgage Bank this week issued what is believed to be the largest Irish mortgage ACS to be sold to end investors this year, a Eu500m deal. The Cover understands that the Irish issuer has also hired a new head of long term funding from Depfa.

Santander is said to have retreated from launching a new three year benchmark covered bond today (Thursday), after having sounded out the possibility of a deal yesterday (Wednesday).

Société Générale is planning to issue its debut covered bond, a five year obligations foncières issue of up to Eu1.5bn backed by loans to the public sector, according to a report from Standard & Poor's.

The quest for an issuer to re-open the market continues, with Dexia Municipal Agency believed to have found limited enthusiasm for a new deal after pre-sounding in difficult conditions. Meanwhile, Italy’s Banca Popolare di Milano (BPM) has attempted to push itself to the front of the Italian bond queue following remarks by an official at the bank.

With the primary market shut again after ING wriggled through a brief opening last week, the covered bond market has been casting about for likely candidates to re-open it after the Easter holiday. The wide range of mandates outstanding — some of them from last year — is proving an obstacle to identifying the market’s white knight.

ING Bank flew in the face of prevailing wisdom yesterday (Thursday), paying 30bp over mid-swaps to sell a Eu1bn five year structured covered bond – its first, at that – which showed that rumours of the primary market’s death had been greatly exaggerated.

Covered bond market participants were suffering from shock today (Thursday) after ING Bank opened books for its debut issue late this morning. But by early afternoon they were celebrating the reopening of a primary market that had been expected to remain moribund until perhaps after Easter at the earliest, albeit with a five year deal at 30bp over mid-swaps.

The strength of an issuer’s domestic investor base has emerged as a key determinant of covered bond spreads since the crisis began last summer. Those that benefit have been able to relax, while those reliant on foreign investors have redoubled their efforts to penetrate new pockets of money.

It might seem unbelievable now, but when Abba went on their inaugural European tour in 1974 a lack of demand meant that their first German concerts were not sold out. But Sweden’s four euro jumbo covered bond issuers faced no such problems last week, with German investors applauding their harmonious approach.