Europe

Covered bond market participants are firmly focused on Thursday, when the ECB could announce another round of covered bond buying. Regardless of market conditions, a deal on Monday was always going to be unlikely because of German holidays. But the weak market opening has made a deal between now and the ECB meeting more tricky — particularly for the smaller names that dominate the pipeline. Covered bond traders reported a very quiet morning, with customers unwilling to take a position before Thursday.

Moody’s and Fitch have downgraded the senior rating of Clydesdale Bank. Though the borrower’s triple A covered bond rating remains intact, the cuts are unhelpful in the context of a recent mandate and a roadshow of its newly established covered bond programme.

Approval to create a new banking group, Kutxa Bank, has prompted Fitch to place the Long-term Issuer Default Ratings (IDR) and Viability Ratings (VR) of two of the three merging cajas, Bilbao Bizkaia Kutxa (BBK) and Kutxa, on Rating Watch Negative.

Moody’s placed Cédulas Hipotecárias issued by Unicaja on review for downgraded yesterday, and those issued by Caja España de Inversiones, Salamanca y Soria’s (CEISS) on review for upgrade.

Deutsche Pfandbriefbank (pbb) has returned to the covered bond market after almost two years away. It sold a €500m five year mortgage Pfandbrief which was barely subscribed.

Fitch revised its outlook on Intesa Sanpaolo from stable to negative, on Wednesday, and affirmed the issuer rating at AA-

In the first euro benchmark trade for four weeks, Crédit Mutuel Arkéa sold its inaugural public sector Obligations Foncières on Tuesday. Syndicate officials had not expected a French issuer to reopen benchmark supply, though demand from domestic insurance buyers has been evident recently.

Bank of Ireland is poised to raise €1bn of secured funding in the private placement market, in what many bankers say is likely to have been a repo arrangement with a UK bank. The financing comes against a backdrop of improved investor perception of the Irish Republic itself, and though it is early days, it shows progress can be made when macro conditions stabilise.

UniCredit’s German entity, HypoVereinsbank (HVB), brought its third covered bond of the year, a four year offering with a 2.125% coupon, on Tuesday. The borrower did not reach its target deal size and had to settle for a €500m print, with buyers taking smaller tickets than usual, suggesting they remain risk averse.

Deutsche Pfandbriefbank (pbb) returned to the covered bond market on Wednesday with its first benchmark since January 2010. The €500m five year trade is the second of three Pfandbriefe launched in the last two days and offered one of the highest spreads for German paper this year.

Austria’s Raiffeisen-Landesbank Steiermark brought its debut covered bond on Tuesday, choosing to test investor appetite for a new name with a three year €500m no grow deal.

Sentiment has clearly improved with two deals and one tap announced in the primary market, while bids have gingerly returned to the secondary market. However, investors, traders and syndicate bankers say the tone is skittish, leaving most feeling guarded.