Ireland

AIB Mortgage Bank enjoyed a stellar response for its first covered bond this year. The deal attracted the most demand for any Irish covered bond since the Irish government’s bail-out of its banks.

AIB Mortgage Bank has mandated leads for a seven year covered bond to be launched on Wednesday, subject to market conditions. Meanwhile, Aktia Bank has picked leads for a covered bond roadshow starting next week.

Moody’s upgrade of Irish covered bonds will expand the universe of demand. The rating action should underpin the Irish ACS market’s recent outperformance, that has been led by the Bank of Ireland’s recent five year. However, despite the real estate market stabilising, two Irish banks were downgraded due to persistent asset quality challenges.

Bank of Ireland returned to the covered bond market on Tuesday to issue its fifth deal since November 2012, when it returned after the Irish sovereign debt crisis. It was well oversubscribed with plenty of orders, but less spectacularly so than on previous issues.

Last week Hypo Real Estate Holding said it would sell the Dublin based Depfa plc by June. However market participants do not think that will happen, if the tight prices of the defunct bank’s covered bonds are anything to go by. But the market is wrong to think Germany won’t sell up.

Depfa was little changed in the secondary market on Tuesday, despite having delayed its sale, while dealers reported that the general market had stabilised after earlier weakness.

After a seven year slump and a 50% price fall, the Irish housing market is finally stabilising, although a recovery is still some way off, Moody’s said on Thursday.

The most interesting take away from this week’s Bank of Ireland covered bond was the improved depth and quality of demand, according to Darach O’Leary, head of wholesale funding at Bank of Ireland.

Bank of Ireland Mortgage Bank opened books for a 3.5 year covered bond on Wednesday after mandating leads a day earlier. The deal took advantage of a strong performance in Irish bonds in the wake of improving economic fundamentals, and was the tightest spread for an Irish issuer since late 2010 when Ireland accepted a €85bn sovereign bail-out.

There were fears that investors had hit their country limits for Ireland earlier this month, when AIB Mortgage Bank’s five year covered bond drew a lukewarm response. But Bank of Ireland disproved this on Wednesday by pulling in a big oversubscription for the longest maturing Irish covered bond issue since the sovereign crisis.

Credit Mutuel CIC and AIB Mortgage Bank both launched covered bonds on Tuesday. The French transaction offered a larger new issue premium and attracted greater demand, but this came from a much narrower range of investors than the Irish deal, which larger investors spurned due to country limits.

Bankers reported on Thursday that there has been barely any movement in Hypo Real Estate Holding bonds since it announced on Monday that it would start looking for a buyer for its Depfa Bank plc subsidiary, thereby fulfilling the European Commission’s conditions for its earlier bail-out.