Europe

Terra Boligkreditt followed Nordic peer DNB Boligkreditt with a seven year benchmark on Tuesday. Boasting a new ownership structure and collateral of exemplary quality, Terra priced a well received trade inside its outstanding curve.

Demand for safe-haven high quality paper played an important role in drawing DNB Boligkreditt to market this week. The borrower sold a successful €1.5bn trade, though it told The Cover it had not intended to launch a deal.

DNB Boligkreditt got the covered bond market off to a flying start on Monday with a €1.5bn seven year benchmark deal. Norwegian peer Terra Boligkreditt has readied its own euro trade and could launch on Tuesday, while two German issuers have mandated for five year mortgage Pfandbriefe.

Cédulas from strong names tightened on news that the EU is to provide the Spanish banking sector with €100bn in financial aid. But though the move is supportive for secondary levels, Spanish banks have limited issuance capacity in the short term. In addition, saddling the sovereign with new debt could lead to ratings pressure, and Cédulas ratings would not survive a sovereign downgrade.

Over the last 18 months, more and more international corporates have discovered the attraction of the Swiss franc bond market, with many borrowers tapping the sector for the first time. High yield borrowers have found that they have access to the market, while last October German utility RWE became the first international corporate name to issue a hybrid capital transaction in Swiss francs. But does the market remain a niche funding pool, to be used only infrequently by borrowers to top up their borrowings in other currencies, or have Swiss francs become a core financing tool for international corporate borrowers? EuroWeek gathered together some of the leading dealers and borrowers to discuss the opportunities.

The recent run of Pfandbriefe looks set to continue, with at least two more German credits closely monitoring the market. Meanwhile, a rally in OATs combined with an enduring domestic bid mean the first French covered in two months could be only days away, said syndicate bankers.

Suncorp Bank could turn to the euro market for its next covered bond trade after launching an inaugural deal in Australian dollars this week. Meanwhile, both tranches of Clydesdale Bank’s domestic debut were trading tighter on Friday morning. But though the borrower said it will be a repeat issuer in the covered market, the euro basis swap will consign it to sterling for the time being.

Volatile markets have clearly helped drive the bid for all German assets — as was most conspicuous when Münchener Hypothekenbank issued its 10 year Pfandbrief this week.

Clydesdale Bank sold a debut benchmark covered bond on Thursday, which was originally mandated in 2010. The borrower opted to take its first step in sterling, and took advantage of demand at both ends of the curve with a well placed dual tranche trade.

Deutsche Bank delivered the week’s third German Pfandbrief benchmark on Thursday, matching Münchener Hypothekenbank’s record low coupon for a 10 year trade a day earlier. Together with HSH Nordbank’s trade on Wednesday, German credits have sold six euro deals in a row, and the pipeline of potential Pfandbrief is not yet exhausted, said syndicate bankers.

The UK’s Clydesdale Bank has finished a domestic roadshow and could launch an inaugural benchmark mid-week after receiving final investor feedback on Tuesday. Australia’s Suncorp Bank, meanwhile, is expected to announce a formal mandate for its own domestic debut later in the week.

A phenomenal reception for three Pfandbrief benchmarks this week has raised hopes that fresh German trades will maintain primary momentum next week. Meanwhile, French sovereign and agency paper has tightened strongly in secondary.