Finland

Nordea’s redemption of its only remaining hard bullet covered bond on January 30 was credit positive because it reduced the risk of a fire sale, Moody’s said on Monday. All the issuer’s outstanding deals are soft-bullet redemptions.

The covered bond market had a watershed moment on Friday when OP Mortgage Bank launched its 10 year. Despite an attractive spread, the deal was unable to get the sort of traction that the issuer may have hoped for. It was no coincidence that as books opened, ECB president, Mario Draghi, raised the prospect of full scale sovereign quantitative easing — something that is likely to make covered bonds look relatively expensive to government bonds.

Credito Emiliano became the second issuer to take advantage of the European Central Bank’s (ECB) buying programme, launching a covered bond on Thursday. The deal led to a repricing of the issuer's curve in a move that could spur other peripheral names to return to the market.

Nordea Finland has issued the first deal from a eurozone bank that is eligible for the European Central Bank’s covered bond purchase programme. Though it was priced at the tightest ever spread for a 10 year deal for a non-German issuer, investors said it offered good relative value.

OP Mortgage Bank returned for the second time this year on Wednesday to issue a €1bn five year covered bond. Though it was the tightest spread for a Finnish transaction seen in the last five years and priced with a negligible new issue premium, it still attracted a robust level of oversubscription.

Credit sentiment is positive, and it seems unlikely that the European Central Bank would take anything other than an accommodative stance at next week’s policy meeting, but bankers are getting cautious that valuations are becoming overstretched, particularly in those markets which have until now been considered safe havens.

On Monday, Aktia Bank launched and priced its second euro covered bond benchmark. Despite some investor concerns over Finland’s relationship with Russia that were encountered during the investor roadshow, the deal exceeded the issuer’s pricing and distribution expectations.

AIB Mortgage Bank has mandated leads for a seven year covered bond to be launched on Wednesday, subject to market conditions. Meanwhile, Aktia Bank has picked leads for a covered bond roadshow starting next week.

Finland’s OP Mortgage Bank returned to the covered bond market on Monday to issue a €1bn seven year benchmark. It paid a relatively small new issue premium, reflecting its long scarcity value, the high quality of its deal, and the deal size.

Nordea Finland and Sparebanken Vest Boligkreditt achieved the best results among the slate of deals that were issued by core covered bond issuers this week. Both transactions attracted among the highest level of over subscription, despite pricing at the tightest spreads.

The year’s first batch of covered bond issues have been easily absorbed by a wide range of investors producing comfortably oversubscribed books. The first peripheral deal mandate has come from Portugal and another from Spain is expected shortly.

Four issuers from Finland, France, Australia and the UK are set to price covered bonds on Tuesday and Wednesday. Market conditions are broadly constructive, especially for higher yielding names, said bankers, but core issuers might have to offer concessions to tempt investors in a busy start to the year.