France

Société Générale SFH returned to the covered bond market on Monday, after nine months away, to issue a €1bn deal due January 2021. It was only its second deal of the year, down from four deals in 2012. With covered bonds becoming increasingly rare, SG was able to attract a solid book from a wide dispersion of investors and price with a modest new issue premium.

BPCE SFH followed Commerzbank with a 10 year covered bond, but in contrast it offered a very attractive spread to mid-swaps and to OATs and looked set for an eye-catching 2.5% coupon. The deal was announced late in the morning, but it attracted vigorous demand even before the books were open

All bar one of France’s public sector covered bond programmes face downgrades after Standard & Poor’s cut the Republic of France by one notch from AA+ to AA, Crédit Agricole research said on Friday. However, French mortgage backed covered bonds should avoid any downgrades. In any case dealers were certain the impact would be negligible.

HSBC has returned to the covered bond market for the second time this year with a seven year deal which, like its earlier transaction, was notable for its breadth and depth of demand.

Moody’s has assigned a triple A rating to the €199m of commercial mortgage back Pfandbriefe issued by NATIXIS Pfandbriefbank AG.

France’s Caisse Francaise De Financement Local returned to the market for the second time this year to issue a 15 year euro deal — the fourth of 2013, but the first from France. It offered a modest premium to the French curve and, being sufficiently different from a host of other covered bonds out at the same time, it was well received.

Five issuers from France, Germany, Ireland, Austria and Italy have joined the covered bond pipeline. And, with the European Central Bank ready to consider further extraordinary liquidity measures, the conducive technical backdrop looks set to remain. Despite this, the longer term supply outlook remains uncertain and overall issuance, which is at the decade’s low, is not about to improve.

This week’s French covered-bond supply was the highest in the year so far as three issuers collectively raised €3bn on demand of €5.5bn over nearly 300 orders. Though the sell side predictably claimed all deals were a success, investors conspicuously exercised a high level of discrimination.

BPCE has raised €1bn, avoiding paying a new issue premium while funding well inside levels that prevailed even a month ago. But with volatility likely to rise and more supply expected, investors have been careful not to inflate their orders, which will be filled in full.

Credit Mutuel CIC and AIB Mortgage Bank both launched covered bonds on Tuesday. The French transaction offered a larger new issue premium and attracted greater demand, but this came from a much narrower range of investors than the Irish deal, which larger investors spurned due to country limits.

The European Commission has approved an extension and slight increase in the state guarantee for Caisse Centrale du Crédit Immobilier de France, giving authorities extra time to draw up a final plan for the state-rescued bank.

Standard & Poor's has assigned a preliminary triple-A rating to the inaugural €10bn medium term covered bond programme of La Banque Postale Home Loan Obligations de Financement de l'Habitat. Having roadshowed in July, it is poised to take advantage of strong market conditions by pricing its first transaction in the near future.