France

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.

Secondary trading has picked up pace in light of limited primary issuance. An attractive rates environment has ensured continued demand for long dated French paper, while selling has increased in peripheral covered bonds now flat to the government curve.

During the crisis, the Nordic covered bond market firmly established its credentials as an anchor of stability, with spreads holding firm and borrowers maintaining their access to the market. Since then, continued strong demand for exposure to the region has supported a further narrowing of spreads relative to other core European covered bonds. In the EuroWeek/Natixis Nordic covered bond roundtable, a number of leading issuers from the region discussed the underlying reasons for this strength, and the outlook for the market.

While Coventry Building Society is expected to bring an inaugural sterling deal this week, via leads BNP Paribas and Barclays Capital, the majority of regular issuers may decide to wait until after Easter.

Compagnie de Financement Foncier priced a difficult Eu1bn 10 year deal on Wednesday, with market participants divided as to why the deal struggled. The jumbo benchmark was priced in line with ambitious guidance, though the slow book build was unexpected in a market primed for long dated paper from a high quality French name.

The momentum around long dated core supply rumbles on, with Compagnie de Financement Foncier launching a Eu1bn 10 year benchmark deal on Wednesday. The deal comes amidst some talk that it was not the easiest sell and a continued widening of French paper relative to German. But with the outlook for France stable and a new law set to enhance structured deals, France’s dominance of the covered market looks unthreatened.

Crédit Mutuel Arkéa priced its second public jumbo covered bond on Wednesday, taking advantage of demand for duration. Although the borrower has only one deal outstanding, it is becoming increasingly well recognised. Investors are likely to have taken comfort from its intention to transfer to the new Sociétes de Financement de l’Habitat framework.