Spain

Nationwide and Caixabank launched long dated deals on Wednesday. Even though both trades were fairly priced, this part of the curve was heavily supplied. The deals also suffered from a widespread market malaise, partly stemming from renewed concerns over Greece. But Nationwide's was undoubtedly the stronger deal, being more appropriately sized and priced. It was also placed with high quality private investors, in stark contrast to the Spanish deal.

Fitch and Moody’s have interpreted Spain’s new bankruptcy regime differently, though according to DZ Bank covered bond research analysts, both agencies see elevated credit risk in Spanish cover pools relative to international standards.

After a three year absence, Bankia returned to the covered bond market in style on Wednesday. With a coupon that’s likely to pay a rare 1%, the issuer was able to attract a high quality, well oversubscribed, diversified book and paid virtually no new issue premium.

Caja Rural de Navarra issued a €500m seven year mortgage backed Cédulas on Tuesday at almost half the spread level achieved by Intesa San Paolo in January. The strong outcome underscored the impression that spread tightening momentum for smaller peripheral covered bond issuers has continued undiminished.

The Spanish issuer has mandated Banco Cooperativo Español (no-books), BBVA, Crédit Agricole CIB, DZ Bank and HSBC as joint-lead managers for a euro-denominated mortgage-backed Cédulas. The seven year deal is expected to launched on Tuesday and will be rated A1 by Moody's.

Caixabank’s plans to acquire Banco BPI will damage the issuer’s solvency and Moody’s has put the issuer rating on negative watch. Though the rating of both its mortgage and public sector covered bonds will also be dragged down, planned changes to rating agency’s methodology should ultimately mean the ratings end up unchanged.

Standard and Poor’s has completed the review of Spanish mortgage covered bonds following a change in its methodology, leading to a number of upgrades. Analysts said the agency’s rating process was complex and not easy to understand.

After pulling a 10 year deal last year, AIB Mortgage Bank returned to the market on Tuesday to price a very successful seven year. At the same time its Spanish peer, Bankinter, chose to issue in the same 10 year maturity that foiled AIB last year. Both banks achieved a solid result suggesting better quality peripheral covered bond issuers have not been affected by events in Greece.

The larger than expected quantitative easing programme announced by the European Central Bank on Thursday has turbo-charged the well-established bull flattening trend in covered bonds and trading volumes have tripled from earlier in the week. With the long end of French market now offering a tempting spread to OATs, real money buyers are set to return. And with Bonos and BTPs rallying hard, relative value between covered bonds and sovereigns should soon be restored in the Cédulas and Obbligazioni Bancarie Garantite markets.

Moody’s upgraded 12 Italian and Spanish covered bonds into “Aa” territory after the close on Wednesday, taking the bonds from category 2A to 1B in the liquidity coverage ratio (LCR). Though this should theoretically improve bank demand, last week’s LCR impact study published by the European Banking Authority (EBA) showed most banks had already met their minimum LCR requirement, suggesting scope for an improvement in appetite will be limited.

The covered bond primary market maintained robust momentum on Thursday as another four issuers priced deals. The seven year tenor remains the firm favourite with two new trades on Thursday taking the total to eight this year.

Cajas Rurales Unidas is set to become the second Spanish issuer to launch a deal this week, having mandated leads for its third euro benchmark. The transaction is likely to offer the most attractive spread seen in covered bonds this year, and could reprice the issuer’s curve.