Nordics

Bayerische Landesbank began taking indications of interest for a benchmark public sector Pfandbrief, expected to be priced on Thursday, which could end the mysterious drought in the covered market.

Secondary trading has paused for breath lately, but there are still good pockets of liquidity and interest – specifically for French, UK and to a lesser extent Dutch and Scandinavian deals. The primary market could be due another slow week though a French deal is highly likely, with Société Générale tipped as a probable candidate. UK issuers are looking at the dollar market but there is speculation that one is looking at sterling.

Primary market activity was confined to a lone mandate from Dexia Municipal Agency on Monday, though issuers across core Europe are watching the market closely, said syndicate officials.

April was the first month without record issuance, and the first in which total supply was less than that of the previous year. Deutsche Bank analysts report that year to date supply of euro benchmarks remains at a clear historical high however, with public issuance from the UK also at record levels. Borrowers from Norway and Spain, among others, have been suggested as likely candidates for next week, and though no mandates have been announced, syndicate officials said the market remains open for peripheral and core names alike.

The larger than expected Eu600m tap of Bankinter’s two year cédulas speaks to potential demand for tier two Spanish issuers. Though no firm rumours are in the market for peripheral issuance next week, bankers believe the moment is there – particularly given that a less certain growth outlook may potentially close the funding window for more challenged names.

Stadshypotek priced the tightest Swedish covered bond deal of the year on Wednesday, and the tightest non-Pfandbrief trade of 2011. The Eu1.5bn print was increased from the planned Eu1bn on the back of strong central bank participation, and an order book of Eu1.8bn.

Sweden’s Stadshypotek has priced a comfortably oversubscribed, upsized trade. Though in line with initial guidance, the plus 32bp print seemed ambitious. Nevertheless, the price and size clearly worked, proving that cash rich buyers are eager to digest fresh supply from top tier, rare names in core jurisdictions – something that Stadshypotek was well placed to take advantage of.

Banque Populaire Caisse d’Epargne restarted benchmark issuance on Tuesday, launching the first euro denominated Obligations á l’Habitat. The inaugural Eu2bn deal was well received by a cash rich investor base that has had to make do with secondary market purchases since April 14. Though there was no further primary issuance, UniCredit Bank Austria and Sweden’s Stadshypotek mandated leads for three and five year deals respectively, to be launched in the near future.

After two weeks without benchmark issuance market participants are looking past the UK royal wedding and May Day holiday to a resumption of primary market activity on Tuesday. Syndicate officials were modest in their expectations however as, with peripheral markets effectively closed and some core names in blackout, prospective issuance from for core jurisdictions appears sparse.

Moody’s fifth covered bond monitoring overview suggests that Norwegian covered bonds have the highest collateral quality, according to Bernd Volk, head of European agency and covered bond research at Deutsche Bank. The report also indicates the collateral risk of Portuguese and Irish bonds, has deteriorated, while the cover pools of Spanish and Greek issuers have the highest loss expectancy, said Volk.

After the pricing of Helaba’s Eu1bn 5 year no grow and Crédit Agricole’s $1.5bn 3.25 year, SBAB’s Swedish Covered Bond Corp is in the market on Thursday with a Eu1bn no grow five year. From here on issuance could start to fall — as a number of factors conspire.