Germany

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.

A quartet of 10 year trades was launched this week, with ABN Amro, Crédit Mutuel Arkéa Skandinaviska Enskilda Banken, and Eurohypo all tapping the long end of the curve. While ABN Amro and Crédit Mutuel Arkéa executed successful trades which have since performed well in the secondary market, Germany’s Eurohypo priced just inside Sweden’s SEB on Friday. One syndicate official said the outcome may signal a new chapter for covered bonds.

Dual 10 year deals were launched on Thursday, with Skandinaviska Enskilda Banken and Eurohypo the latest names to answer demand for long dated paper.

French, UK and German names were active on Wednesday, continuing the shift away from southern jurisdictions. Lloyds launched its second euro deal of the year and Nordea became the latest borrower to tap the dollar market. UniCredit ensured peripheral Europe was represented, mandating for a Eu500m tap of an outstanding 2017 trade.

The Covered Bond Investor Council is to set down guidelines for issuers to provide information on collateral pool transparency.

Deutsche Hypothenkenbank priced its first Eu1bn print in almost five years and its first public sector backed deal since 2005. Despite rarity appeal, the bond was priced at the wider end of guidance, illustrating price sensitivity among large German accounts.

Deutsche Hypothekenbank Hannover is set to price a public sector backed Pfandbrief this afternoon, following NIBC’s first public deal which was priced at the end of last week. The book build on both northern European deals has been seamless, despite further volatility and credit rating concerns around peripheral Europe.

The debate around cover pool transparency has once again reared its head after M&G Investments warned that “not all covered bonds are alike and while some are exceptionally strong, the opaque structure of many others could harbour unwelcome surprises for investors.”

Despite widespread market volatility and risk aversion, the covered market has remained active, though distinctly muted. Berlin Hannoversche Hypothekenbank sold a mortgage backed jumbo Pfandbrief transaction on Tuesday, and on Wednesday taps from French issuers CM-CIC and CRH were launched.

Uncertainty as to the full effect of Japan’s earthquake has prompted widespread risk aversion among investors, and allowed Berlin Hannoversche Hypothekenbank to have the market to itself on Tuesday.

The covered bond market is hoping a national champion will soon bring the first Portuguese deal of the year, following the sovereign’s successful bond auction on Tuesday. Elsewhere, Spain’s La Caixa mandated banks for its deal and LBBW is in the market with a dollar benchmark. Meanwhile, the pricing of two German deals on Tuesday went as smoothly as anticipated.