France

Banco Santander opened books on a five year cédulas hipotecarias with guidance of the 50bp over mid-swaps area this (Tuesday) morning, surprising market participants because a 10 year issue had initially been expected. Meanwhile, Dexia Municipal Agency is said to be preparing a 12 year benchmark.

Standard & Poor’s yesterday (Monday) affirmed a further five covered programmes at AAA under its new covered bond rating methodology, taking the number of programmes that have kept their top rating to 11.

In contrast to most of this week’s supply, the inaugural HSBC Covered Bonds (France) transaction was yesterday (Wednesday) priced at the tight end of where it had been whispered, despite being the seventh seven year of 2010 and being launched into a weak market.

Compagnie de Financement Foncier negotiated a tricky turn in the market to launch the largest three year covered bond since May 2008 yesterday (Tuesday). The issuer told The Cover that the deal’s size reflected the strong demand it encountered, especially from Asian and central bank buyers.

The benchmark covered bond market is today (Wednesday) set to break through the previous record for issuance in a week, with HSBC Covered Bonds and UBS having launched seven and three year deals, respectively, and Abbey understood to be whispering a five year issue.

Three issuers announced mandates this (Monday) morning, ensuring that the pipeline remains bulging even after three issuers closed books on new issues, as the pace of supply showed no sign of relenting in the second week of the new year.

Standard & Poor’s has taken the first actions under its new covered bond rating methodology, affirming six programmes’ AAA ratings.

Next week promises to be as busy as this week’s record opening to a year, with two more issuers having officially announced plans for benchmarks in the past 24 hours on top of three outstanding mandates. Supply of Eu5.5bn yesterday (Thursday) took the week’s total to Eu10.25bn from seven deals, just short of the eight totalling Eu11bn in the busiest ever week for the covered bond market at the end of September.

With four new jumbos hitting the market this (Thursday) morning, the number of benchmark issues this week is second only to the last week of September. However, investors have expressed disappointment about what they called expensive spread levels.

A Eu1.5bn seven year covered bond for BNP Paribas off its Home Loan programme yesterday (Tuesday) met with a strong reception from investors who, according to a BNP Paribas official, demonstrated an encouraging degree of conviction in the new issues that reopened the primary market.

Bankers said that Banco Bilbao Vizcaya Argentaria turned over a new leaf with the first Spanish covered bond of the year today (Tuesday), a benchmark transaction that – like deals for BNP Paribas and Dexia Kommunalbank Deutschland – is set to be priced at the tight end of guidance on the back of an oversubscribed order book. The trio of deals mark the reopening of the jumbo market in 2010.