Germany

Norddeutsche Landesbank is set to open books for a US dollar denominated benchmark, having mandated leads for a roadshow two weeks ago. Meanwhile, Berlin Hypothekenbank on Tuesday successfully placed a €125m tap of its five year deal at deeply sub-Euribor levels, highlighting the funding disparity for German issuers in dollars compared to euros.

The credit quality of Pfandbriefe is not under threat from the recent rise in German apartment prices, Moody’s said on Monday.

After last week’s flurry of covered bond deals, the primary market kept up its pace on Monday as Norddeutsche Landesbank mandated leads to roadshow a US dollar benchmark, while Aareal Bank priced a small floating rate deal in euros. The secondary market was well supported, but activity was limited by mounting concern that this week’s US debt ceiling deadline may be broken.

Two issuers succeeded with covered bond debuts on Thursday. Mediobanca’s choice of a 10 year maturity for its inaugural deal was vindicated when it priced a €1bn benchmark comfortably inside guidance, while Commerzbank’s first foray into the mortgage Pfandbrief market enjoyed the smooth execution expected of a leading German bank.

Italy’s Mediobanca decided not to press ahead with a covered bond debut on Wednesday as the Republic of Italy launched a seven year BTP on the same day. Instead the issuer is expected to launch a deal targeting the mid to long end of the curve on Thursday, when it is likely to be joined by Commerzbank, which has mandated for a seven year mortgage Pfandbrief.

Commerzbank plans to issue a seven year mortgage Pfandbrief on Thursday, in its first mortgage-backed deal not issued from Eurohypo’s programme.

Moody’s has assigned a triple A rating to the €199m of commercial mortgage back Pfandbriefe issued by NATIXIS Pfandbriefbank AG.

German issuers have struggled to price deals much through swaps this year, but if there was one issuer that could, it was always likely to be Münchener Hypothekenbank. After pricing a €500m five year at 14bp through mid-swaps this time last year, it returned to the covered bond market on Thursday with a more generously priced and larger deal which, despite being this year’s tightest, still managed to offer some performance potential.

HSH Nordbank and Raiffeisenlandesbank Niederösterreich-Wien joined the rush of issuers bringing deals on Wednesday, selling five year and seven year no grow €500m benchmarks, respectively. While RLB NW continued the price tightening trend for Austrian landesbanks, HSH Nordbank offered a generous spread to make sure any rating or reputational concerns among investors were cast aside.

Five issuers from France, Germany, Ireland, Austria and Italy have joined the covered bond pipeline. And, with the European Central Bank ready to consider further extraordinary liquidity measures, the conducive technical backdrop looks set to remain. Despite this, the longer term supply outlook remains uncertain and overall issuance, which is at the decade’s low, is not about to improve.

The four euro benchmarks that were priced this week are mostly trading slightly tighter in the secondary market, despite being priced with very small new issue premiums. Along with a period of benign macroeconomic news, the negative net supply of euro benchmarks in 2013 has created a particularly supportive backdrop for new issues, according to covered bond bankers.

The resumption of post-summer covered bond supply continued on Thursday, including the first issue out of peripheral Europe. UniCredit’s €1bn seven year was priced at the tight end of guidance, while Belgian bank KBC also tapped the market for a €750m three year that was well received, confirming the window for issuance remains wide open.