Europe

Non-Eurozone supply remains in high demand, but Caisse de Refinancement de l'Habitat (CRH) could be the first core European name to test the water this week, syndicate bankers told The Cover.

Länsförsäkringar Hypotek became the first Nordic issuer to tap the Swiss franc market in covered bond format this year when it priced a Sfr175m seven year note on Thursday. However, with pricing still not meeting larger Nordic financials’ targets, market participants do not expect a flurry of covered bond supply out of the region to follow.

The Russian mortgage market has grown quickly, lifting prospects for fledgling covered bond issuance. However, despite being Ucits eligible and in line with the European Covered Bond Council’s Label definition, the country’s legal framework is not yet aligned with western Europe’s.

Berlin Hannoversche Hypothekenbank (Berlin Hyp) and Dexia Kommunalbank Deutschland (DKD) have bought back a combined total of over €3.5bn in public sector Pfandbriefe across 14 outstanding trades. As well as providing a precedent for other public sector lenders to follow, the buybacks should help tighten German Pfandbrief spreads in the secondary.

Despite the holiday shortened week, activity in the secondary covered bond market has been relatively good. Though not all houses attest to seeing flows, some banks have seen quite a lot. German and Scandinavian markets are very well supported, the UK has performed very well, France is mixed and Spain is offered.

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Austria’s Hypo Noe Gruppe Bank convinced almost 100 investors to participate in its longest covered bond to date. It does not intend to issue another public sector trade this year, but told The Cover it is setting up a mortgage cover pool to fund its residential loans through covered bonds.

Barclays took year to date dollar benchmark covered bond supply to $24bn with a hugely successful 144A/RegS $2bn five year trade. Panama’s Global Bank has also opened books on its inaugural dollar deal, though given the transaction’s unique structure it is likely to take longer than the typical covered issue.

Austria’s Hypo Noe Gruppe Bank took advantage of a lone issuance window on Wednesday to launch a strongly oversubscribed public sector backed 10 year trade. The rarity of the issuer, the quality of the collateral and the relative resilience of Austrian Pfandbriefe to recent volatility made the trade compelling. Falling Pfandbrief supply in the primary and public sector buybacks in the secondary, meanwhile, have increased appetite for a shrinking asset class.

Nykredit Realkredit on Tuesday finished a roadshow for its first euro benchmark junior covered bond since 2010. Some continental buyers are unfamiliar with the structure, and past deals have been priced far closer to senior than covered levels. However, Denmark’s largest mortgage lender rarely issues in euros, and a high spread and lack of alternative investment opportunities could draw a healthy mix of credit and rates buyers.