Spain

Caja Madrid achieved a 20% hit rate on a Eu16.846bn exchange offer that was closed on Friday, with new three year government guaranteed debt providing for the bulk of a maturity extension that the liability management exercise was targeting. The bank was tackling refinancing challenges that Moody’s today (Monday) said was facing Spanish issuers of mortgage backed covered bonds.

Fitch on Monday added four classes of triple-A rated multi-cédulas to a list of 48 that it has kept on negative review since placing them there in February. Five notch downgrades could follow for the majority of transactions under review in the absence of remedial action, according to the rating agency.

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.

Fitch downgraded mortgage backed covered bonds issued by Spain’s Bankinter from AAA to AA+ on Friday, following a downgrade of the issuer the day before.

New euro benchmark covered bond supply appears on course to hit the market tomorrow (Tuesday) as issuers continue with preparations for deals despite a backdrop of uncertainty about whether or not a bail-out of Ireland will be set in motion.

Fitch downgraded Spain’s Bankinter from A+ to A, on negative outlook, yesterday (Thursday), because it believes the bank remains dependent on wholesale funding, a reliance that puts pressure on its liquidity and profitability.

Caja Madrid and Bancaja yesterday (Wednesday) launched an exchange offer that includes an opportunity to swap covered bonds issued by the borrowers, which together with five other savings banks are forming a new alliance, into government guaranteed securities, senior unsecured notes and/or cédulas hipotecarias to be issued by Caja Madrid.

A Eu350m Cajamar tap yesterday (Wednesday) brought euro benchmark issuance this week to Eu700m, the lowest level since supply restarted at the end of August, but market participants expect primary market activity to pick up next week.

Spain’s Cajamar is gathering orders for a tap of a 3.5% October 2014 issue that is being marketed at a level around 205bp wider than where the original deal was sold in October 2009, while Crédit Agricole yesterday (Tuesday) priced a Eu350m increase of a October 2025 deal in response to domestic investor interest in longer maturities and some shorts in the market.

The benchmark covered bond market opened for issuance on Tuesday, but was restricted to a Eu350m tap of a 4% October 2025 Crédit Agricole deal. But Spain’s Cajamar is also testing investor interest for an increase of a 3.5% October 2014 issue with what would be the widest spread so far in the benchmark market.

The primary market for benchmark covered bonds was quiet this (Monday) morning, with public holidays in many parts of continental Europe a contributing factor, but one of several Spanish banks to have reported third quarter results is said to be considering accessing the market.

Concrete plans for new issue projects next week appeared thin on the ground this (Friday) morning, but this could be a misleading indicator of forthcoming supply. At least three issuers are on the road next week, Spanish banks are emerging from blackout periods, and bankers said that French issuers are likely to be encouraged by a successful Compagnie de Financement Foncier Eu1bn 10 year transaction sold yesterday.