Spain

La Caixa returned to market on Tuesday, after postponing a six year cédulas trade on April 5, amid claims the deal struggled to gain traction on the basis of an over-ambitious spread whisper.

On the back of conducive bank finance regulation, covered bond issuance is soaring, writes Bill Thornhill. Meanwhile several countries, most notably the US, are moving towards establishing fresh covered bond markets

While Coventry Building Society is expected to bring an inaugural sterling deal this week, via leads BNP Paribas and Barclays Capital, the majority of regular issuers may decide to wait until after Easter.

Abbey National was the sole benchmark covered bond issuer on Thursday, becoming the first repeat visitor to the sterling space this year, though other names are also expected to return. The comfortably oversubscribed £1.25bn 10 year print enjoyed strong participation from foreign investors, yet another encouraging sign of the sterling market’s growth.

Record covered bond issuance almost reached parity with senior unsecured issuance in the first quarter of 2011, a trend that is unlikely to be reversed by demand constraints on the product, said bankers this week. But widening spreads between the products could put the brakes on.

Amid renewed supply from core issuers, and ratings pressure on peripheral jurisdictions, Kutxa (Caja de Ahorros y Monte de Piedad de Gipuzkoa y San Sebastián) launched its second ever standalone benchmark deal on Thursday.

Covered bond secondary market levels have remained largely unaffected by Moody’s downgrade of 18 Spanish covered bond programmes on March 25, which followed a downgrade of the borrowers’ issuer ratings. Although all the downgraded institutions remain under review, or on negative outlook, market traders said the immediate effect of the cuts has been negligible.

The Netherlands NIBC Bank brought primary market activity to a close this week, launching an inaugural Eu500m three-year deal on Friday via leads LBBW, Natixis, and RBS, which priced the new issue at 105bp over mid swaps.

Caja Madrid became the latest Spanish name to come to market on Wednesday, though it did not enjoy the tight pricing of its compatriots. Its Eu750m three year cédulas hipotecárias came in the wake of twin Spanish deals from Banesto and BBVA on Monday, which priced inside initial guidance.

Banco Espanol de Crédito sold a Eu600m no grow issue off the back of one of the borrowers largest ever order books on Monday.

Banco Bilbao Vizcaya Argentaria priced the lowest yielding covered bond from a Spanish issuer in the last year on Monday.

Twin Spanish mandates in four year maturities from Banco Bilbao Vizcaya Argentaria and Banco Espanol de Credito, opened the market on Monday, after a week with scant primary activity, though strong secondary trading in cédulas.