Europe

Last week Hypo Real Estate Holding said it would sell the Dublin based Depfa plc by June. However market participants do not think that will happen, if the tight prices of the defunct bank’s covered bonds are anything to go by. But the market is wrong to think Germany won’t sell up.

Compagnie de Financement Foncier (CFF) returned to the covered bond market for the first time in over a year on Tuesday, with its newly restructured collateral pool, to issue a €1bn five year Obligations Foncières. The textbook syndication attracted a high quality book and, despite being tight to the issuer’s curve, offered good relative value, as well as benefitting from scarcity value given CFF’s long absence.

The build up to Íslandsbanki’s annual Thorrablot celebrations — for the uninitiated, it’s an Icelandic midwinter festival — is always fraught with nerves, anticipation and a slightly sickly feeling at the prospect of crunching down on goats’ testicles. But this year’s shindig on Thursday night has some added spice — or, more appropriately, pickle — as it could be the last event ever.

When General Electric issued a debut $500m sukuk five years ago it did not receive a great deal of acclaim. But with the company considering another potential Islamic deal later this year, neither it nor other rumoured Western first time borrowers such as Total should fear for a bad result this time around.

Norway’s Vardia Insurance Group on Thursday announced its plans to float on the Oslo Stock Exchange next month.

Primary market activity picked up on Wednesday as France’s BPCE took advantage of secondary demand at the long end of the French curve to tap its November 2023 issue by €500m taking the deal size to €1bn. After issuing a deal in December, the National Bank of Canada has returned to mandate the same group of leads as its previous deal for a European roadshow.

Ratings dominated the covered bond market on Tuesday as several Spanish deals were upgraded, while Austria’s Hypo Alpe-Adria Bank’s covered bonds were downgraded. A number of core issuers are monitoring the market, but are not yet ready to the pay the new issue premiums being demanded.

LBBW returned to the covered bond market on Monday to issue a €500m 15 month deal from a €550m book. The exceptionally short dated funding was driven by asset liability matching needs and provided cheaper funding than the issuer could have found in the money markets.

Bayerishe Landesbank’s covered bonds were unaffected on Friday by news on the wind down of Austria’s Hypo Alpe-Adria (HAA), which it partially owns. However, other Austrian covered bonds widened a few basis points after Austria’s finance Michael Spindelegger warned that unsecured bondholders might need to share in the bank’s losses.

Demand was still clearly skewed to the higher yielding peripheral markets on Friday, especially for second tier Italian banks, which offer double the spread of multi-Cédulas. And if peripheral spreads continue to tighten, the newly enacted Italian Obbligazioni Bancarie Collateralizzate, or Italian SME backed covered bonds, might eventually attract interest. But only when secondary legislation has been formulated and come into force which will take time.

Investor appetite has shifted to non-national champions, bankers told The Cover on Wednesday, with the window for issuance wide open for lower rated peripheral banks. A Portuguese issuer could step forward soon, one banker said.

Credito Emiliano’s €750m five year has earned praise for its tight pricing, but it was demand from outside the eurozone, including from Asia and Switzerland, that suggests Italy’s recovery story is gaining traction.