Europe

Nykredit will begin the first Danish auction of 2012 later this month, selling an estimated Dkr115bn (€15.4bn) between February 27 and March 12. The traditional one year adjustable rate mortgage bonds will make up the bulk of the auction, though with the low yield environment borrowers have moved along the curve.

Swiss franc Australian covered bonds remained in vogue this week, with Commonwealth Bank of Australia issuing the largest one yet — a Sfr775m dual trancher — on Wednesday, after Australia and New Zealand Banking Group opened the way for its peer group with a Sfr725m icebreaking transaction in January.

Market sentiment has begun to weaken while the Greek sovereign’s future remains uncertain. The mood has hurt the secondary performance of recent trades across several asset classes, including Barclays’ €2bn five year covered bond which was launched on Wednesday.

Barclays Capital shrugged off sovereign rating action and the possibility of a Greek default to launch a well oversubscribed euro benchmark on Wednesday. The covered bond market remains technically well supported despite negative headlines, and syndicate bankers still expect issuance to move down the credit curve as blackout periods end.

Tightening spreads and bulging order books since January have failed to lure German banks into issuance. The rate at which the banks are deleveraging and retreating from foreign markets has made financing through wholesale markets completely redundant. But they will still need to put their new balance sheets to work, and Fitch has questioned whether the domestic market is large enough to absorb this lending without mispricing.

Spain’s Bankinter and Bankia are expected to launch short dated trades later this week, after the primary market paused for breath on Monday. Cash rich investors with an appetite for risk should ensure they get a strong reception, but negative rating action could yet cause them to hold off.

The bullish market was again in evidence at the end of last week after CFF issued a €2bn August 2015 at mid-swaps plus 95bp on Friday. Though this was flat to its curve, the borrower attracted a €7bn book from about 270 investors.

China's sovereign wealth fund's restatement that it won't invest in eurozone rescue funds shines a light on its investment preference: physical assets in Europe

Compagnie de Financement Foncier built one of the largest ever orderbooks for a French issuer on Friday, pricing a €2bn 3 1/2 year trade flat to its outstanding curve. Short end trades have flown regardless of name or jurisdiction, and syndicate banks said reverse enquiry for Italian borrowers has now started to build.

In little over a week five Spanish banks have attracted over €17bn of demand from 847 investors, enabling them to raise a collective €6.7bn. Not bad for a market that was closed just a few weeks ago — and well beyond the wildest expectations.

Abbey National priced a £1.5bn dual tranche sterling trade on Wednesday, which boasted the longest covered bond transaction of the year so far, and the fifth short dated sterling floater.

CaixaBank’s €1bn five year offered further proof of returning confidence in the Cédulas market. The deal attracted another large, regionally diverse book, enabling the issuer to print without a new issue premium.