Europe

The surge in covered bond issuance continued on Wednesday, with a trio of benchmarks taking issuance to more than €14bn since the market reopened in the middle of last week. Some 12 trades from 10 jurisdictions have been launched since then.

After €5.75bn of covered bond deals on Tuesday, including a €2bn three year offering from compatriot Barclays, RBS took advantage of the continued window for issuance on Wednesday morning with its own €2bn deal in the same tenor. Investors again showed demand for UK paper, allowing the issuer to price several basis points inside the wide end of guidance.

Long dated paper continued to prove popular in the covered bond market on Tuesday morning, with Caisse de Refinancement de l’Habitat (CRH) opening books on a 10 year deal, becoming the first French bank to issue since the market re-opened last Wednesday. Austria’s Erste Group Bank also tested investor appetite for a seven year trade.

French, UK, Swedish and Austrian issuers launched deals across the covered bond curve on Tuesday, as the market backdrop continued to improve. Caisse de Refinancement de l'Habitat and Austria’s Erste tapped the longer end (see separate story), while Barclays Capital and Swedbank launched three and four year trades respectively.

Analysts warned about the outlook for UK banks this week, saying their cost of funding will rise if ring-fencing proposals are implemented.

UBS was one of three issuers that came to market with a euro benchmark on Thursday, taking advantage of the first issuance window in roughly two months. The Swiss borrower secured a twice covered book for its three and a half year paper, including a significant proportion of new investors.

Despite a meeting of the world’s central bankers at Jackson Hole Nordea Bank Finland kept the primary market alive on Friday, launching a successful €1.5bn five year deal. Syndicate officials welcomed three consecutive days of primary supply, though market conditions have deteriorated since a trio of well received benchmark trades on Thursday. Secondary liquidity still leaves much to be desired, they said, and has not been helped by the attractive premiums offered by the latest issues.

UniCredit brought the Italian covered bond market back to life in dramatic fashion on Thursday, offering hopes of market access to other issuers from the jurisdiction. In addition to boasting a record high spread for an Italian issuer, UniCredit reports that the €1bn 10 year trade also carried the tightest ever spread to BTPs, pricing flat to the sovereign curve.

UniCredit reopened the Italian market once again on Thursday, to the surprise of market participants. After almost three months without Italian supply, the national champion followed ING into the 10 year segment, launching a €1bn no grow benchmark. Syndicate officials disagreed over where the deal priced relative to BTPs, with estimates ranging from flat to 10bp over.

ING on Wednesday confounded predictions that a German or Nordic name would end almost two months of inactivity in the covered bond market. The borrower launched a bold €1.75bn 10 year transaction, which offered investors a generous 15bp concession over its outstanding curve, providing the market with an indicator of the higher premiums now needed to print deals.

UBS and Eurohypo tapped the short end of the curve on Thursday, leaving long dated supply to UniCredit. Swedbank issued a five year dollar benchmark. Meanwhile the pipeline continues to build, with HSBC, Nordea Bank Finland, and Deutsche Pfandbriefbank announcing roadshows ahead of planned transactions.

ING reopened the covered bond market on Wednesday, launching the first euro benchmark in almost two months. Syndicate officials had been waiting for a top tier name from core Europe to end the August lull after a series of successful SSA trades. Several were still surprised, however, that with indices widening and volatility ever present, a borrower stepped forward to pull the trigger on a 10 year trade.