France

Covered bond issuance is on hold while the European Central Bank’s meeting in Frankfurt commands all attention. ECB president Mario Draghi is expected to provide details of a sovereign bond purchase programme and peripheral sovereign spreads have already tightened in expectation. But analysts said investors fearing a disappointing programme could switch to into covered bonds — with Cédulas the most likely to benefit from such a shift.

Crédit Agricole gave an investor presentation for its new Obligations Foncières (OF) programme in Paris on Wednesday, ahead of what could be the first covered bond from a French issuer since late March. French spreads have stopped grinding tighter in the secondary market, but some names still trade flat or even through OATs.

The French Ministry of Economy and Finance released a press release on Saturday evening saying that it would guarantee the debt of Caisse Centrale du Credit Immobilier de France (3CIF) and its subsidiary CIF Euromortgage, subject to approval from the European Union and the French Parliament.

The French government has been forced to guarantee the debt of Credit Immobilier de France after it failed to find a buyer for the mortgage provider.

Crédit Agricole CIB has been mandated to conduct a roadshow for a deal from Crédit Agricole Public Sector SCF’s new €10bn Obligations Foncières (OF) programme. Standard and Poor’s said the issuer is likely to bring a €1bn deal in September.

SSA and corporate markets were busy on Tuesday, keeping the primary covered bond quiet. But issuance should improve this week as investors filter back from holiday, said bankers, though they warned that as spreads have tightened a long way in a short time the market may widen after the initial flurry of deals.

Moody’s cut CIF Euromortgage’s covered bonds from triple-A to Aa1 on Tuesday, after lowering the sponsor bank’s senior and short term debt ratings. The Credit Immobilier de France (CIF) group has not yet found a buyer after starting a sale process in June, and though state support is highly likely it remains locked out of the capital market with redemptions approaching.

This week’s two covered bond deals have helped increased activity in secondary markets, traders told The Cover. There has been selling pressure in the senior unsecured but this has only translated to more mixed flow in covered bonds.

Covered bond issuers proved reluctant to follow ING’s lead and launch trades on Tuesday, as activity shifted to the senior market. But given the strong reception for secured issuance syndicate bankers remain confident of supply later in the week.

The covered bond market is gearing up to restart next week, said syndicate bankers, who expect at least two benchmark trades to hit the screens. German and Scandinavian borrowers are tipped as the most likely candidates to take advantage of squeezed secondary levels. But with no end to spread contraction in sight, the urge to wait and watch levels grind tighter could cause some borrowers to hold off.

Though the secondary market was subdued on Tuesday, the tone was still clearly constructive with buyers in virtually all sectors bar the medium part of the multi-Cédulas curve. Though the near term outlook is expected to remain buoyant, dealers are sharply divided on the outlook for this autumn and beyond.

UniCredit drew a stellar reception for the first Italian benchmark in almost a year on Tuesday, with the vote of confidence for peripheral risk raising hopes for follow on trades from Italian and Spanish names.