Europe

On Wednesday morning Pfandbriefbank der Schweizerischen Hypothekarinstitute — the institution responsible for providing Swiss mortgage banks with loans to finance their mortgage businesses — issued a triple-tranche transaction totalling Sfr782m.

Despite growing concerns that a Spanish bad bank will cause collateral pools to shrink, there is a growing sense of confidence that real money Cédulas investors will not become forced sellers as bonds hold the investment grade rating threshold and the ECB dampens systemic risk fears.

With peripheral concern resurgent, covered bond investors are looking for safety. But having grown tired of exceptionally tight core levels they are also in search of spread. Nordic issuers are best placed to offer them both and should be taking advantage of the primary while they can, said syndicate bankers.

Santander Totta will become the first bank to undertake a liability management exercise in which RMBS will be exchanged for a covered bond. The innovative operation offers key advantages for both investors and the issuer, and could become a model for other borrowers, particularly from Spain which has the greatest potential by virtue of its large and well established covered bond and RMBS markets.

Stadshypotek pushed the dollar covered bond curve out to seven years this week, pricing the longest covered bond benchmark in the currency since 2007.

SNS Bank has released guidance for its newly structured Hermes XVIII RMBS, just 15bp wider than where the bank priced a covered bond one month ago. The move follows Yorkshire Building Society’s Brass No 2 RMBS, which last week set the tightest spread for a UK RMBS since the onset of the financial crisis — and a level tighter than where sterling covered bonds trade.

Deutsche Hypothekenbank found demand lacklustre for its seven year mortgage Pfandbrief on Tuesday, with even domestic buyers proving reluctant to participate.

Markit is expected to unveil a new tradable liquid covered bond index in October or November. Though it may not necessarily be actively traded, it should provide a more useful measure than the existing index, as it will help investors to gauge more closely their performance in relation to the most relevant parts of the covered bond market.

Deutsche Hypothekenbank Hannover mandated for its second benchmark covered bond of the year on Monday. The borrower is expected to price the seven year mortgage backed trade on Tuesday, taking the number of deals in that maturity year to date to almost double that of 2011.

Spain’s CaixaBank launched a novel covered bond tender offer on Friday. The borrower will buy back at par up to €2.11bn of floating rate bonds from retail clients but participating bondholders must keep the funds in a new deposit account for at least a year after the exchange.

Sweden’s Stadshypotek priced a A$750m inaugural transaction on Friday, paying only a small premium over where it would have funded in the domestic market.

Sampo Housing Loan Bank brought its first benchmark covered bond in almost a year on Thursday, pricing a successful €1bn no-grow jumbo trade.