France

A Eu1bn five year Caja de Ahorros del Mediterráneo cédulas hipotecarias on Friday concluded a difficult week in the covered bond market to the issuer’s and the leads’ satisfaction. This week looks set to be quiet again, with two or three issues expected, although market participants were this (Monday) morning more relaxed about the outlook than they were last Monday.

Crédit Mutuel-CIC has set up a second covered bond issuer, but an official at the French mutual group told The Cover that the new entity will not be issuing publicly.

A crisis at Crédit Foncier de France and the imminent arrival of the euro called for action to support French lenders in the late 1990s. The French establishment responded by drawing on inspiration from northern Europe and a 19th century instrument closer to home.

Obligations foncières passed their biggest test in the wake of Lehman Brothers’ collapse. And although the structured issuance of French national champions outperformed those based on the law of June 25, 1999, they, too, could soon benefit from being given a legislative blessing.

Despite its obvious attractions, the obligations foncières framework proved too inflexible for several of France’s lenders. But this did not prevent them from entering the covered bond market, as BNP Paribas led a second revolution in French covered bonds.

Today is the 10th anniversary of the first obligations foncières of the modern era, launched by Compagnie de Financement Foncier on 6 October 1999. In this special report, we look back on the origins, growth and future of the French covered bond market.

A trio of new obligations foncières issuers arriving in 2008 and 2009 after a 6-1/2 year hiatus showed that the instrument had retained its relevance, and could even challenge its structured counterpart for innovation.

Buoyed by the arrival of a third name and flattered by comparisons with their German counterparts, the early obligations foncières issuers took full advantage of the strength of the new product to go out on the road in search of new investors.

Covered bonds made a comeback in the Swiss franc market this week, as investors reached for a highly rated asset class that, unlike other triple-A product, still offers a spread above mid-swaps.

A series of new issues at aggressive levels in what could be the busiest ever week in the covered bond market has raised fears among investors that the asset class is facing a bubble.

Caisse de Refinancement de l’Habitat this (Friday) morning reopened its 5% April 2019 benchmark. Leads Landesbank Baden-Württemberg, Natixis and Société Générale priced a Eu750m increase at 45bp over mid-swaps.

Dexia Municipal Agency yesterday (Monday) priced its third obligations foncières jumbo of the year, and the fourth covered bond benchmark for the Dexia group. But a rapid bookbuilding process for the Eu1bn seven year issue showed that investors’ credit lines were still open for further supply from Dexia MA, the issuer told The Cover.