Spain

Amid growing concern over peripheral euro sovereigns, covered bond analysts are focusing on the exposure to the troubled periphery of public sector cover pools in core jurisdictions.

Primary market activity was confined to a lone mandate from Dexia Municipal Agency on Monday, though issuers across core Europe are watching the market closely, said syndicate officials.

All Portuguese benchmark deals now trade inside government bonds.

April was the first month without record issuance, and the first in which total supply was less than that of the previous year. Deutsche Bank analysts report that year to date supply of euro benchmarks remains at a clear historical high however, with public issuance from the UK also at record levels. Borrowers from Norway and Spain, among others, have been suggested as likely candidates for next week, and though no mandates have been announced, syndicate officials said the market remains open for peripheral and core names alike.

The larger than expected Eu600m tap of Bankinter’s two year cédulas speaks to potential demand for tier two Spanish issuers. Though no firm rumours are in the market for peripheral issuance next week, bankers believe the moment is there – particularly given that a less certain growth outlook may potentially close the funding window for more challenged names.

After two weeks without benchmark issuance market participants are looking past the UK royal wedding and May Day holiday to a resumption of primary market activity on Tuesday. Syndicate officials were modest in their expectations however as, with peripheral markets effectively closed and some core names in blackout, prospective issuance from for core jurisdictions appears sparse.

Secondary trading has picked up pace in light of limited primary issuance. An attractive rates environment has ensured continued demand for long dated French paper, while selling has increased in peripheral covered bonds now flat to the government curve.

After failing to get a six-year cédulas away earlier this the week, La Caixa successfully priced a five year deal on Tuesday. The eventual transaction, which saw two leads replaced, illustrates that, despite an improvement in fortunes for Spain generally, investor demand is clearly focused on the short to medium part of the curve for peripheral names; anything longer becomes much more price sensitive.

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.