Norway

Commonwealth Bank of Australia looks set to become the first bank in the country to issue a covered bond in the home currency. The deal is also set to become the largest FIG bond ever sold in Australia.

A series of mandates from outside the eurozone hit screens on Friday. Australian, New Zealand and Norwegian issuers could all launch in the next two weeks, while three Turkish banks have hired UniCredit Menkul Degerler for trades in 2012.

DNB Nor and Lloyds came to market on Wednesday with five year offerings that enjoyed a healthy oversubscription. German investors and bank treasuries drove the trades for the non-eurozone credits, enabling both to price at the tight end of guidance. But in terms of spread, the difference of nearly 120bp showed that the similarities ended there.

The covered bond primary market has opened strongly with a trio of top tier names from core jurisdictions collectively raising around €4.5bn on comfortably oversubscribed books. A further seven deals have been mandated for issuance in the near future. This impressive showing is to be expected given liquidity is technically strong. Yet big challenges lie ahead, specifically for peripheral markets — where borrowers remain shut out.

The ECB’s unprecedented refinancing operation may hit covered bond supply at the short-end of the curve, but medium and long-term issuance — the mainstay of the covered bond market — could benefit from greater confidence in banks’ health, bankers told The Cover.

Euro benchmark supply will drop in 2012, covered bond analysts predict, despite the product having become the cornerstone of bank funding. Rarely have analysts’ expectations diverged so far, with issuance estimates ranging from €120bn-€190bn.

Markets stabilised on Tuesday morning following S&P’s announcement that it may cut sovereign ratings across the eurozone, ending three days of sovereign tightening. Overall the tone remains constructive, according to covered bond traders, with better buying in French and peripheral covered bonds. But with only a couple of weeks of trading to go before year end, and covered bond spreads not following sovereigns tighter, issuers are still most likely to wait for an opportunity in January.

Sparebank 1 Boligkreditt plumbed the safe haven bid for Norwegian assets, braving turbulent markets to issue a €1bn five year, which was priced at the tight end of guidance with a modest new issue premium.

Peripheral covered bonds tightened against government debt on Monday, undoing sovereign outperformance following last Thursday’s rally. Bid offer spreads continued to widen across the board as participants remain cautious ahead of purchase programme details.

A stronger than normal bid from Nordic investors helped Finland’s Sampo Housing Loan Bank to sell a no grow €1bn five year covered bond, its second benchmark this year, on Wednesday.

Convincing 136 accounts from 19 countries to participate in a €2bn benchmark, DnB Nor brought the transaction many syndicate officials had been waiting for.

Finland’s Sampo Housing Loan Bank launched a five year deal on Wednesday, three weeks after it finished a European roadshow. The deal attracted a wide range of accounts and looks assured of success, boding well for other smaller bank issuance.