Europe

Several issuers could launch deals this week but after recent sovereign bond market volatility and a lacklustre reception to last week’s deals, the reopening trade will need to be from the right name at the right spread, said bankers.

Münchener Hypothekenbank opened books with guidance on its €500m July 2028 at 15bp-17bp over mid-swaps on Thursday through BNP Paribas, BayernLB, DZ Bank, LBBW, Nord/LB and WGZ Bank. The fact that the deal was priced at the wide end of guidance, relied on lead orders and was barely sold outside Germany suggested a lacklustre reception.

Caisse de Refinancement de l’Habitat returned to the market on Thursday for the first time since March, with a fairly priced re-opening of its €1bn January 2025 through joint leads BNP Paribas, LBBW, Natixis and Société Générale. The transaction was the only one this week that was genuinely oversubscribed. By setting price talk at an attractive initial level guidance could be tightened without losing an order.

After recent volatility this week’s syndications were not straightforward. This was most conspicuously illustrated by Crédit Mutuel Arkéa, which opened books on Thursday for a €700m July 2023. The deal competed head to head with French peer, Caisse de Refinancement de l’Habitat, which tapped investors in the 12 year. After failing to get enough traction, Arkéa was forced to reduce the issuance size to €500m and set the spread at the wide end of guidance.

China and other big emerging economies are slowing down; this will hit some developed markets more than others

The primary market sprang back to life on Thursday as two issuers launched benchmarks and a third tapped in benchmark size. But after recent volatility the syndications were not straightforward and there was a lot of price sensitivity in the books. The curious decision to supply at the long end made them even more of a challenge and the fact that two just scraped by, with one being downsized, suggested issuers have been slow to acknowledge the change in market conditions.

Caisse Francaise de Financement Local is lining up its first public sector covered bond issue and plans to raise at least €2bn this year, according to marketing documents seen by The Cover. Meanwhile, La Banque Postale, also owned by the French state, has mandated joint leads for a roadshow.

German Pfandbriefe have a strong buffer against losses if a borrower defaults, Moody’s said on Monday. Despite a continued rise in German house prices, the German Pfandbrief Act puts a conservative cap on the value of mortgage-backed loan collateral backing covered bonds, the agency said.

Three German borrowers issued benchmark covered bond deals this week with variable results. The transactions illustrated that German investors have become more discerning since May 22 when Federal Reserve chairman Ben Bernanke revealed that he was considering scaling down the Fed’s bond-buying programme.

Aareal Bank priced the covered bond market’s fourth Pfandbrief in a row in on Wednesday. It was unable to tighten pricing from guidance but drew enough demand for its €500m no-grow deal.

Commerzbank plans to be a regular public sector Pfandbrief issuer following its inaugural deal this week and it is working on a new mortgage backed programme, it told The Cover on Wednesday.

Two issuers joined the primary covered bond pipeline on Tuesday, improving the market outlook. Caisse Francaise de Financement Local (Caffil) and Raiffeisenlandesbank Niederösterreich-Wien AG have both mandated banks for deals, which will be preceded by roadshows