Finland

Issuers are waiting for some better news out of Greece before deciding whether to press on with transactions, despite most receiving strong interest during roadshows. After selling in the secondary market on Thursday, sovereign spreads on Friday tightened on rumours of an aid package for Greece. But with market sentiment yo-yoing from one day to the next, any window for issuance before the summer lull is likely to be narrow, and perhaps too risky for first time euro borrowers such as ANZ Bank.

Covered bond analysts have turned their attention to rising house prices in Scandinavia, following a report by Standard & Poor’s, which warned that rising private sector debt to GDP levels, fuelled by increased mortgage borrowing, could present a danger to banks and their assets in the event of a severe economic downturn.

There were few indications that a success was on the cards, given that Sampo’s Eu1bn ten year struggled and that market volatility had scared off other issuance this week but Aktia Real Estate Mortgage Bank’s Eu500m five year trade on Wednesday attracted enough investor interest to warrant an increase.

Aktia Real Estate Mortgage Bank defied difficult market conditions on Wednesday to build a twice covered book for an intended Eu500m five year trade, which allowed the borrower to increased the deal size to Eu600m. The result stands in contrast with fellow Finnish issuer Sampo Housing Loan Bank, which found the going much tougher on Tuesday for its Eu1bn ten year trade.

Sampo Housing Loan Bank sold a Eu1bn 10 year transaction on Tuesday, which despite high credit and cover pool quality priced at the wide end of guidance. Syndicate officials pointed to a rise in rates and general aversion to risk among investors as two factors that held the transaction back.

Finnish issuers Sampo Housing Loan Bank and Aktia Real Estate Mortgage Bank came to market on Tuesday. Aktia began taking indications of interest on its Eu500m five year trade following Sampo opening books on a 10 year deal, which will be priced later today.

Borrowers from peripheral and core jurisdictions priced over Eu6bn worth of benchmark covered bonds across three currencies this week, which included inaugural deals from Italian and New Zealand issuers. Prospects for supply next week are similarly diverse, though volatility and European holidays may narrow the window for issuance.

As a proxy for national mortgage markets, LBBW research has taken a closer look European mortgage pool statistics and macro-economic housing market trends. Controversially, it finds that Spanish NPLs have halved in the last two years. In contrast Scandinavia, which is stereotyped as safer than safe, could be heading for trouble as house prices reach 30-year highs.

After the activity and drama of the first part of the week, Ascension Day holidays across most of Europe have lent a quiet tone to the market and a more sedate close is anticipated. But with as many as five deals mandated and a few others rumoured, the pace is likely to pick up next week.

Though the covered market was quiet on Friday, market participants can look back on highly successful week in which almost Eu7bn in euro benchmarks was issued. After faltering supply in April UniCredit analysts report that covered bonds are on track for another record month. Issuance thus far in May is almost Eu20bn, less than Eu2bn short of the record total supply for that month.

On Thursday, Nordea took advantage of the flight to quality bid, scarcity of short end Scandinavian supply and sizeable bank treasury and central bank interest to launch and price a Eu2bn three year covered bond backed by Finnish prime residential mortgages. Timing and choice of lead played an important role in attracting top quality Asian demand.

Scandanvian borrowers have joined their French and German core colleagues to take advantage of a market highly receptive to quality issuance. SpareBank 1 Boligkredit tapped the dollar space on Tuesday, while Nordea Bank Finland priced a well oversubscribed three year euro trade on Thursday. Aktia real estate mortgage bank has mandated banks for a series of investor meetings beginning in early June.