Europe

UniCredit has overhauled its funding strategy to insulate itself from hostile wholesale markets, its head of funding said this week. With the senior unsecured market shut even for top tier issuers, the bank announced a new funding strategy for 2013-2015 with an “embedded” policy of no issuance in senior unsecured.

The mortgage backed Pfandbriefe of four German Landesbanks are at risk of losing their triple-A ratings, after Moody’s lowered the senior unsecured ratings of the issuers by up to three notches on Wednesday.

European covered bond markets continue to look in poor shape as the macro sovereign backdrop dramatically deteriorates. This suggests that Commonwealth Bank of Australia’s euro denominated benchmark is likely to remain on hold for the time being. But that should not delay Westpac, which is planning to open books on Thursday afternoon.

Australia and New Zealand Banking Group priced the first Australian covered bond on Tuesday, launching a benchmark dollar trade that attracted broad demand and a healthy level of oversubscription. Meanwhile RBS has opened books on the week’s second euro benchmark, though given the jurisdictions concerned CBPP2 remains unable to support the primary market.

Sparebank 1 Boligkreditt plumbed the safe haven bid for Norwegian assets, braving turbulent markets to issue a €1bn five year, which was priced at the tight end of guidance with a modest new issue premium.

The risk of a disorderly Greek default has prompted Moody’s to place four of the country’s covered bond programmes on review for downgrade. Three of the programmes are already rated Ba3, though BBB- ratings from Fitch should still ensure repo access.

Cold shouldered by international capital markets, Italian covered bond issuers are increasingly turning to the ECB and domestic retail investors to backstop their funding amid a threats of a sovereign meltdown.

Crédit Mutuel Arkéa overcame difficult markets to bring in €1bn of funding on Wednesday through a dual tranche tap of 3.5 and 10 year bonds. The deal attracted the first bit of purchase programme (CBPP.2) buying and its success may encourage other issuers to use lower risk taps if tricky market conditions persist over the next few weeks.

The euro covered bond market has begun to show signs of life, a full five trading days after the formal start of the ECB purchase programme. Crédit Mutuel Arkéa will price a rare dual tranche tap later on Wednesday.

While Westpac and Commonwealth Bank of Australia headed to the US on Monday to market debut covered bonds, ANZ has started meeting investors in Europe, after finishing a US roadshow last week.

The covered bond market waited in vain on Tuesday for the start of ECB purchase programme (CBPP.2) buying in the secondary market. Despite moderate sovereign tightening, peripheral covered bond spreads continued to trade well inside government bonds, particularly in Italy where it is increasingly doubtful that issuers will be able to bring benchmark deals against outstanding curves.

News of the ECB’s latest covered bond purchase programme has failed to move secondary spreads, analysts and syndicate officials told The Cover on Monday. Meanwhile the situation in peripheral jurisdictions continues to deteriorate, making the programme’s success all the more contingent upon concrete political resolution in the individual countries, and Europe as a whole.