Europe

Russia's Siberian Coal Energy Co (Suek) might take its five year pre-export finance facility into general syndication after it closed at $1.5bn in senior syndication, with commitments of more than $2bn.

The covered bonds of French issuers that are backed by relatively weaker collateral are trading at the tightest spreads, while French deals backed by higher quality collateral are trading at wider spreads, according to DZ Bank covered bond research.

There was strong secondary market interest in the long end of the peripheral market, and especially Italian bonds, on Thursday. In contrast, core covered bonds came under greater selling pressure, partly due to switching interest from Wednesday’s deals. The flows were counter-intuitive to the wider macro backdrop, where the flight to safety bid has resumed.

Intesa Sanpaolo brought forward a 12 year deal on Wednesday, after witnessing the extraordinary demand for UBI Banca’s 10 year. Intesa’s book was less spectacularly oversubscribed, but its long tenor should ensure a high proportion of quality interest, boding well for its performance.

The primary covered bond market sprang into life on Wednesday with four deals from Germany, France and Italy. Pride of place went to Unione di Banche Italiane, the only one to have publicly mandated a deal the previous day. It was oversubscribed about five times based on the unreconciled book and may have pushed Intesa Sanpaolo into bringing forward its own issuance plans (see other story).

Moody’s and DBRS have upgraded the Series 1 covered bonds of Portugal’s Banco de Investimento Imobiliario (BII) after they were restructured using a pass through mechanism. The notes will be retained and are designated purely for central bank funding. Parent bank, Banco Comercial Português (BCP), is monitoring the market and, if it were to issue a publicly syndicated deal, it would use its existing programme structured with a soft bullet maturity, said bankers.

WL Bank was set to price the shortest fixed rate euro denominated covered bond of the year on Tuesday, at the tightest spread of any transaction since November 2012. Bankers off the deal were surprised that any investor would pay such a tight price, while those on the deal said the cheap funding was a reflection of the issuer’s high quality.

Rating: Aaa/AA+/-

Banca Carige’s covered bonds widened sharply in the secondary market on Thursday amid continued weakness among recent issues, and some selling of second tier peripheral credits.

Kommunalkredit Austria appointed joint leads on Tuesday for a public sector backed deal likely to be launched after a roadshow.

Depfa was little changed in the secondary market on Tuesday, despite having delayed its sale, while dealers reported that the general market had stabilised after earlier weakness.

ABN Amro returned to the covered bond market on Thursday, issuing a €1.5bn 10 year deal with an attractive new issue premium. However, with the long end now saturated with supply and the secondary market still looking soft, questions continue to linger.