France

La Société de Financement Local (SFIL), which owns the French public sector covered bond issuer Caffil, has been given approval by the European Commission to originate and refinance large export credit guaranteed loans.

BNP Paribas made an opportunistic move to price the first 10 year covered bond in over a month on Tuesday via an intraday execution. Strong demand and a book that was twice covered allowed the issuer to increase the size of the deal to €750m from €500m and enabling pricing almost flat to BNP Paribas’ existing curve.

Société Générale issued and retained over €5bn of covered bonds, spread over eight deals with maturities between six and 15 years on Monday. The supply provides contingency backstop liquidity for the bank, and forms a normal part of its liquidity management activity.

Covered bond supply surged this week with investors piling into deals that offered little new issue concession and negative spreads, leading to concern that an inflection point was at hand. However, there was no sign of investor pushback, with the tightest deals from core European issuers experiencing a high level of demand. But some bankers were left wondering just how long the superb conditions would last.

French covered bond regulations that improve transparency on asset liability mismatches and liquidity tests will not be made public, but they should improve supervisory oversight and lower refinancing risk for investors, said Moody’s on Friday.

Caffil returned to the euro covered bond market on Thursday for its second such bond of the year, offering investors a few basis points more in spread in return for a slightly longer maturity.

La Banque Postale printed its first soft bullet euro covered bond, paying a 0bp-1bp new issue premium for its market return, and Helaba doubled the size of its 1.875% 2023s to €1bn with a tap on Tuesday.

Two European banks announced covered bond mandates on Monday – La Banque Postale in euros and BayernLB in dollars.

BPCE made its debut in the offshore renminbi market on Wednesday, pricing a 10 year non call five tier two bond. The French lender joined a series of non-Chinese banks that have tapped the dim sum bond market to beef up their Basel III tier two capital buffers.

Swedbank and HSBC both issued €1bn euro-denominated seven year covered bonds on Wednesday. The slim pricing differential between the two transactions neatly illustrated that covered bonds not eligible for the European Central Bank’s purchasing programme have caught up with those that are.

Société Générale SFH issued a €500m five year Obligations de Financement de l’Habitat on Wednesday, at the tightest ever spread for a non-German issuer. The transaction was comfortably oversubscribed, and with investors increasingly alert to the risk of thin covered bond supply, the issuer paid virtually no new issue premium.

Compagnie de Financement Foncier (CFF) priced the tightest and lowest yielding euro benchmark covered bond from a non-German issuer on Tuesday. The strong result is a testimony to the return of relative value and shows that, despite the historically low absolute yield, investors are desperate for covered bonds which are structurally under-supplied, but for which there is a durable regulatory bid.