Germany

Moody’s expects negative rating actions on covered bonds to substantially outnumber any positive actions in the year ahead, due principally to weakness in the sovereign and banking sectors.

BayernLB yesterday (Monday) tapped the covered bond market for a Eu1bn public sector backed Pfandbrief via joint leads BayernLB, Crédit Agricole, DZ Bank HSBC and SG. The 2.75% July 2016 priced in line with mid swaps plus 12bp area guidance on a modestly oversubscribed order book and particularly benefited from strong foreign investor demand.

After a busy close to last week, covered bond activity has followed through this week with Abbey, Dexia MA and Westpac announcing deals while active bookbuilding commenced on Abbey, Banco Populare and Bayern LB.

Bayerische Landesbank has mandated BayernLB, Credit Agricole, DZ, HSBC and SG for a July 2016 public sector jumbo Pfandbrief.

Eurohypo convinced 75 accounts to participate in a Eu1.25bn five transaction yesterday (Wednesday), the majority of which were real money investors with German interest driving demand.

Following successful Spanish and Italian government bond auctions the primary covered bond market picked up pace today with three mandate announcements two of which are from peripheral European jurisdictions. And, while conditions hold out, there are likely to be a few more mandates in the wings.

Germany’s Eurohypo had the primary market to itself today, launching a Eu1.25bn five year mortgage backed Pfandbrief at 40bp over mid swaps, the middle of guidance. The deal is expected to price this afternoon via leads Commerzbank, Barclays Capital, BNP Paribas, UniCredit and UBS.

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.