France

The primary market sprang back to life on Thursday as two issuers launched benchmarks and a third tapped in benchmark size. But after recent volatility the syndications were not straightforward and there was a lot of price sensitivity in the books. The curious decision to supply at the long end made them even more of a challenge and the fact that two just scraped by, with one being downsized, suggested issuers have been slow to acknowledge the change in market conditions.

Caisse Francaise de Financement Local is lining up its first public sector covered bond issue and plans to raise at least €2bn this year, according to marketing documents seen by The Cover. Meanwhile, La Banque Postale, also owned by the French state, has mandated joint leads for a roadshow.

Two issuers joined the primary covered bond pipeline on Tuesday, improving the market outlook. Caisse Francaise de Financement Local (Caffil) and Raiffeisenlandesbank Niederösterreich-Wien AG have both mandated banks for deals, which will be preceded by roadshows

Caisse de Refinancement de l'Habitat (CRH) sold its second Swiss franc covered bond of the year on Tuesday, targeting the long end with 12 year paper. While it was able to fund at a favourable level compared to its curve, the long maturity hampered orders.

Crédit Agricole SCF returned to the covered bond market for the second time this year with its second ever public sector backed deal. The €1bn 10 year transaction priced through the OAT, which was the first time in the history of the French covered bond market.

Despite a UK holiday syndicate bankers are not ruling out deals on Monday, and there are still borrowers eager to execute bonds in run up to summer, they said.

Moody’s downgrade of Commerzbank and Hypothekenbank Frankfurt (Hypfra) will leave Commerzbank’s covered bonds unscathed but push Hypfra’s public sector bonds down to Aa2, analysts said on Wednesday.

Covered bond issuers decided against bringing benchmark bonds on Friday despite a better backdrop, but there are several potential deals in the pipeline and stronger sentiment should encourage issuers looking to come next week, said bankers.

After Moody’s downgraded French mortgage guarantor Crédit Logement from Aa2 to Aa3 this week, SG said on Wednesday that a downgrade below single-A would result in a 20% haircut to the value of the mortgage loan collateral it guarantees.

Crédit Mutuel CIC became the first French issuer to tap the sterling market for more than five years on Monday. It joined the growing list of foreign banks that have tapped the blossoming sterling covered bond market, in the absence of any UK bank deals for almost a year. In so doing, it raised funds at much cheaper levels than it could have done in euros.

Crédit Mutuel CIC sold its first covered bond of 2013 and its first euro benchmark in over a year on Monday, launching a €1.25bn seven year transaction flat to its own curve.

The quiet period for FIG ended this week with a handful of deals emerging in the covered bond and senior unsecured markets. And in contrast to several tightly priced core European deals seen earlier this year, in which investors had pushed back on terms seen as too aggressive, bankers are now reporting a shift in sentiment.