Germany

Münchener Hypothekenbank (MuHyp) will price its first benchmark dollar covered bond on Friday afternoon, launching the deal after receiving strong reverse enquiry from SSA and central bank buyers.

Bayerische Landesbank (Bayern LB) found strong international demand for its latest 10 year benchmark, which was priced flat to the borrower’s outstanding curve. The €500m trade completed Bayern LB’s 2012 covered bond funding plan, though the issuer’s determination to bring a long dated deal and push for tight pricing limited demand, said syndicate bankers.

Bayerische Landesbank (Bayern LB) launched its first euro benchmark covered bond in over a year on Wednesday, bringing a 10 year public sector backed Pfandbrief originally mandated in July 2011. The trade prioritised pricing over size and received less interest than recent German deals. At the less traditional end of the covered spectrum, Nykredit Realkredit opened books on a tap of a recently issued junior covered bond.

Deutsche Pfandbriefbank (Pbb) has told The Cover that it is planning to launch at least one more euro benchmark covered bond after the summer break. The borrower has already sold three €500m mortgage backed trades so far this year, and said it could turn to jumbo deals in the future.

Increasing reliance on secured issuance and the impact that this has on senior unsecured recoveries could be factored into ratings, Fitch said on Thursday, though it added that the increase in outstanding covered bond issuance is relatively stable for the time being.

Deutsche Pfandbriefbank (Pbb) on Wednesday priced a €500m mortgage backed trade flat to its curve for the second time in just over a month.

ASB Finance launched an inaugural €500m euro benchmark on Tuesday. Pricing was aggressive, said leads, though syndicate bankers away from the trade felt it offered a considerable premium over ASB’s Australian parent, Commonwealth Bank of Australia.

The Association of German Pfandbrief Banks (vdp) has responded to Moody’s assertion that its latest transparency initiative has shortcomings. The rating agency said plans to factor sovereign risk into public sector cover pool calculations do not take into account duration risk. But the vdp claims its proposals are already more conservative than those suggested by Moody’s.

Despite long being lauded as one of the very few effective private sector solutions for wholesale mortgage funding, covered bonds are not quite so divorced from the state as they might seem. As the bank finance market evolves in Europe, is it possible that the implied state support seen in the most longstanding regime is, over time, replicated in other regimes?

Swedish banks head a group of possible covered bond issuers, despite resurgent volatility. The Swedes have largely stayed away from the euro market so far this year, opting instead to rely on domestic demand. But analysts still expect the need for diversification and name recognition among Swedish banks to yield euro benchmarks.

Moody’s has welcomed a proposal from the Association of German Pfandbrief Banks (vdp) to take account of peripheral sovereign risk in public sector backed cover pools by applying haircuts based on the probability of default.

After a flurry of trades from four jurisdictions during the covered bond market’s busiest week in months, the Spanish sovereign downgrade foiled hopes for further issuance on Thursday. But German Pfandbriefe issuers have thrived on volatility, while Caisse de Refinancement de l’Habitat has demonstrated the thirst for yield among European investors. As such the setback in core supply should be merely temporary.