Spain

The distinction between Spanish national champion banks and weaker lenders has become even starker, covered bond traders say. Spreads of multi-Cédulas and Cédulas from second tier banks have moved wider on the back of more rating downgrades.

Cover pool encumbrance was steady last year versus the previous year, Fitch said on Thursday. The most stable levels were among the most encumbered institutions, where covered bonds have made up a large share of their financing for a long time.

Caja Rural Navarra looks set to price its inaugural €500m five year covered bond at the tight end of guidance on an oversubscribed book. But concerns over absolute yield levels and the less than stellar performance of Cajas Rurales Unidas’s recent deal could spook investors, despite the attractive spread, said bankers.

The covered bond market is open for almost any issuer and though its unlikely that activity will pick up quickly, there are a number of potential transactions expected in the coming weeks, bankers told The Cover on Monday.

The subject of SME-backed covered bonds continues to provoke a sharp division of opinion within the industry. And it was a lively topic at the annual covered bond investor conference, held on Thursday in Frankfurt.

The Spanish region of Andalucia’s controversial plans to expropriate properties and stop evictions should not affect Cédulas holders, RBS said on Tuesday. Last week the regional government of Andalucia proposed a decree law to temporarily expropriate properties from financial entities if they are about to evict the occupants.

Banco Popular Español got the primary covered bond market off to a strong start on Monday after it took advantage of the prevailing demand for higher yielding bonds with a tightly priced tap of its March 2017 bond.

Caja Rural de Navarra has picked joint leads for a roadshow and possible deal. Its announcement late on Wednesday came after Moody’s said that the prospective A3 rated €500m Cédulas was overcollateralised by 623% which will allay negative equity concerns.

Miguel Angel Gadea, head of funding at Cajas Rurales Unidas (Cajamar), spoke to The Cover on Wednesday, following its debut deal as a merged entity. Cajamar, which plans to be a regular issuer, has grown deposits, expects to raise its core capital ratio this year and aims to stabilise its ratio of non-performing loans with a proactive approach to servicing.

Cajas Rurales Unidas (CRU) accessed capital markets for the first time on Tuesday, bringing a €500m three year covered bond. Price discovery was tricky, given the absence of liquid comparable deals.

Bankinter’s latest €500m tap this week came with a tighter spread and drew more international accounts than the borrower has managed with any benchmark deal in recent years. As its issuance costs drop its loan portfolio is becoming profitable, and though it remains barred from the senior unsecured market, comfortable covered bond funding costs and foreign demand are steps in the right direction, a funding official told The Cover.

Moody’s has downgraded Italy’s Banca Carige and will turn its attention to the issuer’s covered bonds, which traders expect to come under selling pressure in the secondary market.