France

Despite the holiday shortened week, activity in the secondary covered bond market has been relatively good. Though not all houses attest to seeing flows, some banks have seen quite a lot. German and Scandinavian markets are very well supported, the UK has performed very well, France is mixed and Spain is offered.

Caisse de Refinancement de l’Habitat (CRH) issued its second big Swiss franc covered bond in three months, a Sfr375m dual trancher, bringing its 2012 supply in the currency to Sfr1.025bn.

Primary activity in the European covered bond market focused on France on Tuesday after BPCE said it would tap its 10 year. There was a mixed reception to the news amid fears that OAT underperformance would hit demand, but bankers countered that investors were desperately searching for yield.

Germany’s Helaba broke ranks with cautious covered bond issuers on Tuesday to launch the first euro benchmark trade for two weeks. The rare borrower found strong demand for a €1bn public sector backed transaction, and another deal out of core Europe is expected on Wednesday, said syndicate bankers.

Covered bond supply should restart next week given a stable opening, said syndicate officials on Friday, and several issuers are looking to launch trades. But with upcoming elections in France and the market still full of uncertainty after the renewed volatility of early this week, headline risk could keep second quarter supply muted.

Sovereign markets have started to stabilise but covered bonds have lagged this move and remain under pressure in the secondary market. The focus has been on Spain but dealers also reported weakness in French covered bonds. In the primary market, issuance hopes remain dim, though bankers think there may be room for a Swedish or Finnish deal.

French legislation and a strong structure allowed Axa Bank Europe SCF to price a jumbo trade backed by Belgian collateral inside of where Belgian government bonds were trading. Even if long awaited covered bond legislation arrives in Belgium later this year, the issuer told The Cover it intends to remain loyal to Obligations Foncières.

Axa Bank Europe SCF launched its third and largest euro benchmark covered bond on Tuesday, pricing a €1bn trade at the tight end of guidance. Investors seemed untroubled by the rare RMBS collateral, allowing Axa to follow recent French trades in offering a minimal new issue concession.

The covered bond market is primed for supply, with syndicate bankers expecting several trades this week and at least one announcement to hit screens this Monday afternoon. Though mandates are otherwise scarce, the range of products and currencies available to issuers means they can afford to launch at short notice, and keep their options open.

Top tier names can offer zero premiums on primary trades but lower ranked issuers have no such luxury, syndicate officials told The Cover on Monday.

BNP Paribas priced a heavily oversubscribed 10 year trade through its outstanding curve on Thursday, opening the door to a world of negative new issue premiums.

Société Générale built a €6bn book for its second trade of 2012 on Thursday, pricing a €1.5bn benchmark well inside initial guidance. Meanwhile, Credit Suisse launched only the second dollar trade from a European bank since last September.