Europe

Abbey National sold a £1bn covered bond on Monday, bringing total year to date issuance in that currency to £3bn. Sterling covered issuance in 2011 is already four times greater than last year’s £750m total, according to Dealogic data.

The covered bond market remains primed for issuance despite the quietest week so far this year in terms of primary market activity. Spanish borrowers may join Abbey National and Westpac New Zealand in the market next week, though Abbey’s inaugural sterling issue and Westpac’s first covered bond transaction are set to take centre stage.

Bank Austria priced its first Eu1bn deal on Wednesday. Westpac New Zealand is expected to launch its first euro benchmark covered bond in the near future and Abbey National is due to finish roadshowing on Friday for its inaugural sterling issue.

Landesbank Hessen-Thueringen GZ had the market to itself on Monday, launching its second floating rate covered bond of the year. Though there was a mandate announcement from Caisse de Refinancement de l’Habitat, primary activity has begun to lessen. Nevertheless, names from further afield are on the horizon, with Portuguese national champions watching the market closely and New Zealand’s Westpac expected in the next few days.

Taking advantage of demand for high coupon peripheral debt, La Caixa yesterday (Thursday) priced a long awaited Eu2bn five year cédulas hipotecárias. Despite the allure of a 5% coupon and a relatively tight spread to its senior unsecured, the trade was by no means a foregone conclusion in the context of underlying sovereign spread volatility.

UBI Banca priced a Eu750m no grow benchmark well inside an initial price whisper yesterday (Thursday). Strong demand for the five year obbligazioni banca garantite took leads by surprise.

The covered bond market is hoping a national champion will soon bring the first Portuguese deal of the year, following the sovereign’s successful bond auction on Tuesday. Elsewhere, Spain’s La Caixa mandated banks for its deal and LBBW is in the market with a dollar benchmark. Meanwhile, the pricing of two German deals on Tuesday went as smoothly as anticipated.

The effect of impending regulation on covered bonds was a central theme of the 5th LLBW European Covered Bond Forum, in Mainz, Germany, last Friday.

The primary market has picked up, with two deals emerging and one pricing. Demand is robust and there is good scope for further issuance, say bankers. Deutsche Postbank opened and closed books on Tuesday morning for a Eu1bn mortgage backed 10-year Pfandbrief while Kommunalkredit Austria looked set to price a Eu500m five year later in the day.

The merger of several Spanish cajas into a private bank, announced last week, will lead to credit positive outcomes and the extinction of multi-cédulas, according to Moody’s.

The primary market has slowed to a standstill today, though transactions are in the pipeline and could be due this week — including some new names. In the secondary market, the peripheral sovereign sector has softened but the bid for peripheral covered bonds continues to look well placed.

The primary market continues to steam ahead with BBVA’s latest five year deal proving the major talking point, after it built an astounding book, by far the largest of any deal this year. CM-CIC and Banca Monte dei Paschi di Siena are also in the market with three and seven year deals respectively.