Norway

Sparebanken Vest Boligkreditt launched its second publically sold covered bond yesterday (Monday). In contrast to France there was no obvious new issue premium, and given its small size and the rarity of Norwegian issuance, the deal was always likely to be an easy sell.

After good buying in the long end of the French curve at the end of last week, spurred by the back-up in yields, secondary market activity has slowed markedly and the focus is once again back on the primary where there are several deals are in play. The Italian market is taking centre stage amid concerns that one issuer might crowd out the other.

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.

DnB Nor Boligkreditt came to market yesterday (Tuesday) with a Eu2bn five year transaction, which leads Barclays Capital, Citibank, Goldman Sachs and HSBC priced at 32bp over mid swaps, in line with guidance of the low 30s 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.

Following a premature halt to new issuance this year, syndicate bankers expect the onset of 2011 to bring a rush of benchmark covered bond supply as issuers hasten to execute funding plans in anticipation of continued market volatility. A liquid buy-side should ensure that deals are readily absorbed - at least initially.

Rough market conditions and dwindling liquidity mean that few to no deals could be launched next week although some issuers are still monitoring the market, according to syndicate bankers.

While not immune from nervousness triggered by uncertainty about the prospects and structure of a bailout package for Ireland the covered bond market this week held up relatively well, according to syndicate bankers, who attributed thinner liquidity to the approaching end of the year. A large US dollar private placement yesterday (Thursday) wrapped up sizeable new issuance in covered bonds this week.

Bank of New Zealand International Funding, a subsidiary of National Australia Bank, has met with excess demand for a Eu1bn maximum seven year deal that is the first Australasian covered bond to hit the euro market.

Demand from domestic and German accounts enabled Austria’s Bank für Arbeit und Wirtschaft to today (Tuesday) negotiate a difficult market backdrop to launch a Eu500m five year deal, while a Bank of New Zealand inaugural euro issue is scheduled for launch tomorrow and Caja Madrid has released the spreads for new issues and a cédulas tap being launched as part of an exchange offer.