Europe

The secondary covered bond market saw modest flows on Friday but dealers reported a stronger bid for core names, in particular long end French deals which have not reacted to downgrades. In contrast, the multi-Cédulas sector remains offered reflecting its large exposures to the recently downgraded Bankia.

Core European covered bonds were supported on Thursday despite recent downgrades. But weaker Spanish names were under pressure on concerns that the European Central Bank could be poised to reconsider the repo treatment of covered bonds relative to ABS. Meanwhile, primary hopes were hit after it emerged that programme documentation delays could cause Canadian Imperial Bank of Commerce (CIBC) to launch its benchmark in September rather than next week.

Players in uncleared derivatives are undecided whether to stay in the market because the rules for margin on the trades have still to be set, according to Biswarup Chatterjee, global head of electronic trading at Citigroup in London.

The distinction between Spanish national champion banks and weaker lenders has become even starker, covered bond traders say. Spreads of multi-Cédulas and Cédulas from second tier banks have moved wider on the back of more rating downgrades.

Landesbank Hessen-Thueringen (Helaba) seized on concerted demand for five year paper and a solid market opening on Thursday to price a €500m tap of its outstanding 1% June 2018 bond, paying only a few basis points over secondary levels.

Caisse Francaise de Financement Local plans to follow its successfully priced €1bn seven year debut with another benchmark this year.

Caisse Francaise de Financement Local (Caffil) is set to price its debut €1bn seven year Obligation Foncière inside price guidance, after being helped by an improving market backdrop in Europe.

Moody’s has downgraded Banco Popolare Società Cooperativa’s long-term debt rating by three notches, from Baa3 to Ba3, over concerns about the bank’s asset quality. Analysts expect a three notch cut of its covered bond rating to follow.

Caisse Francaise de Financement Local(Caffil) mandated banks for its debut Obligations Foncières on Monday afternoon, following a stable market opening. Despite speculation that it planned to issue a 10 year deal, it has opted for a seven year tenor.

Gabriele Minotti, head of funding at Credito Emiliano, spoke to The Cover about the bank’s recent covered bond deal, the roadshow and the focus of investors’ questions .

Credito Emiliano attracted a great reception for its first covered bond in two years. The deal’s success, in marked difference to last week’s less than stellar slew of primary deals, reflected the attractive premium, the issuer’s marketing efforts and, most importantly, stable market conditions.

Russia’s DeltaCredit Bank has opened books on a Rb5bn ($151m) five year covered bond and is aiming to close the deal by Friday, said bankers on the deal.