Germany

Dexia Kommunal Bank sold a Eu1b five year benchmark yesterday (Monday), which leads BayernLB, DZ Bank, Deka Bank, Deutsche Bank, Dexia, HSBC and UniCredit priced at 35bp over mid swaps, the middle of guidance.

After the flurry of four deals that priced yesterday afternoon (See separate comments), the market has gone into radio silence.

The pricing of LBBW’s three year public sector Pfandbrief yesterday was probably one of the easiest trades of this year. Along with a handful of other German issuers, it is about as far up towards the rates spectrum for covered bonds as any issuer can get.

The primary covered bond market continues to power ahead with four transactions currently being marketed. LBBW, Dexia Kommunalbank, NordLB and CM CIC are in the market with three, five, 10 and 12-year covered bonds respectively.

Norddeutsche Landesbank today (Monday) launched a Eu1bn no grow 10 year Pfandbrief, which leads Barclays Capital, BayernLB, Natixis, NordLB and UniCredit will price at 20bp over mid swaps, the middle of guidance.

The covered bond market has experienced its busiest ever week with as many as 15 deals pricing, giving a grand total of about Eu19bn over the holiday shortened week.

The iTraxx senior financials is trading wider ahead of the release of the EC’s latest draft consultation paper, which is likely to confirm suspicions that an EU wide initiative on bank bail-ins is going to be hard-coded into regulation.

UniCredit sold a Eu1bn public sector Pfandbrief yesterday (Wednesday), which leads Commerzbank, Natixis, NordLB, RBS and UniCredit priced at mid-swaps flat, after going out with guidance of the 2bp over area.

Primary issuance continues to power ahead with five deals pricing yesterday and a further five deals expected to price this afternoon. Several more have been announced but, in a possible sign of things to come, two have been postponed and there is speculation that another is struggling.

After a very quiet December, market participants are not surprised to see a strong start to the primary market in the New Year, with one deal already priced and as many as seven others on the way.

Germany’s Münchener Hypothekenbank reopened the covered bond market on Monday, pricing a Eu1bn five year mortgage backed Pfandbrief at 10bp over mid swaps, the tight end of guidance, via leads Barclays, DZ Bank, LBBW, UniCredit and WGZ Bank.

Benchmark covered bond supply in 2011 is likely to be close to 2010 volumes, according to covered bond analysts, with no analysis forecasting more than a Eu20bn rise or fall relative to 2010 levels.