France

Bayerische Landesbank began taking indications of interest for a benchmark public sector Pfandbrief, expected to be priced on Thursday, which could end the mysterious drought in the covered market.

Secondary market activity has been focused on Spain lately with end account selling noted in multi-cédulas and single names which, among others, have included BBVA. Though it’s technically possible for the issuer to bring a deal flat to the underlying government, some bankers think that the funding window may have passed, albeit temporarily.

Spain’s Caja Vital Kutxa brought an inaugural covered bond issue to market on Monday, launching a Eu200m no grow trade through joint leads Bilbao Vizcaya Argentaria and Natixis.

Monday was another quiet day for the covered bond market, though syndicate officials remained confident mandates would come. Market participants stressed that covered bonds were not the only asset class where supply was scarce, and were hopeful that as issuers leave blackout and investors become increasingly cash rich, issuance was only a matter of time.

Secondary trading has paused for breath lately, but there are still good pockets of liquidity and interest – specifically for French, UK and to a lesser extent Dutch and Scandinavian deals. The primary market could be due another slow week though a French deal is highly likely, with Société Générale tipped as a probable candidate. UK issuers are looking at the dollar market but there is speculation that one is looking at sterling.

In a covered market dominated in recent weeks by rare and high quality issuance, market participants had awaited Dexia Municipal Agency’s five year Obligations Foncièrs with some trepidation. The deal was a resounding success however; with 100 accounts participating in the twice oversubscribed Eu1bn no grow trade.

Dexia Municipal Agency brought a second Eu1bn no grow five year deal to market on Wednesday, after the publication of positive first quarter results. The trade was well received by investors, allowing leads to price inside of guidance on the back of a Eu2bn order book.

Market participants anticipate two new issues on Wednesday, though the primary market remained quiet on Tuesday. WL Bank mandated for a euro mortgage backed transaction with a five year maturity, and Dexia Municipal Agency is expected to bring its public sector backed Obligations Foncièrs after publishing its results on Wednesday morning.

Amid growing concern over peripheral euro sovereigns, covered bond analysts are focusing on the exposure to the troubled periphery of public sector cover pools in core jurisdictions.

Primary market activity was confined to a lone mandate from Dexia Municipal Agency on Monday, though issuers across core Europe are watching the market closely, said syndicate officials.

Banque Populaire Caisse d’Epargne restarted benchmark issuance on Tuesday, launching the first euro denominated Obligations á l’Habitat. The inaugural Eu2bn deal was well received by a cash rich investor base that has had to make do with secondary market purchases since April 14. Though there was no further primary issuance, UniCredit Bank Austria and Sweden’s Stadshypotek mandated leads for three and five year deals respectively, to be launched in the near future.

After two weeks without benchmark issuance market participants are looking past the UK royal wedding and May Day holiday to a resumption of primary market activity on Tuesday. Syndicate officials were modest in their expectations however as, with peripheral markets effectively closed and some core names in blackout, prospective issuance from for core jurisdictions appears sparse.