Spain

Buoyed by the support of investors who had been absent from the covered bond market, Banco Popular Español yesterday (Monday) afternoon priced the first jumbo since Thursday’s announcement by the European Central Bank of details of its covered bond purchase plan. And a French issuer is said to be sounding the market today (Tuesday) for a possible new issue.

Banco Popular Español has the jumbo market to itself today (Monday). The Spanish issuer is the first institution to launch a new issue after Thursday’s announcement by the European Central Bank of details of its covered bond purchase plan, with one syndicate banker saying he was surprised there was not more primary market activity in covered bonds.

Banesto yesterday (Tuesday) priced its first jumbo covered bond since February 2007, a Eu1bn four year cédulas hipotecarias that is the third Spanish benchmark to hit the market since the ECB announcement on 7 May.

Banesto is set to price a Eu1bn four year cédulas hipotecarias this (Tuesday) afternoon, with books due to close at around 1400 CET. Meanwhile, other issuers are exploring just what the market is willing and able to accept from Spain.

Moody’s yesterday (Wednesday) placed on review for possible downgrade the Aaa ratings of seven cédulas hipotecarias programmes, four cédulas territoriales programmes and 57 series of multi-cédulas.

Moody’s yesterday (Tuesday) put on review for downgrade the senior ratings of 34 Spanish banks because it expects their asset quality to continue to deteriorate, resulting in significantly higher credit losses than were previously incorporated in the ratings, straining capitalisation. The move threatens the ratings of some cédulas hipotecarias.

La Caixa yesterday (Thursday) rounded off with a flourish the busiest week in the covered bond market since May 2008, pricing a Eu1.25bn five year cédulas hipotecarias flat to Santander, even though market participants had said that such pricing was aggressive. Meanwhile, a French issuer tapped the market much tighter than two weeks ago and a Dutch name is said to be preparing to go out on the road.

The books on a five year cédulas hipotecarias for La Caixa are due to close at 1430 CET today (Thursday), with pricing fixed at flat to the level at which Santander reopened the Spanish market on Monday.

Despite considering a new issue, La Caixa looks unlikely to follow-up on Monday’s reopening of the Spanish market by Santander, but a French issuer is instead said to be due to launch a benchmark deal today (Wednesday).

Santander’s Eu1.5bn five year cédulas hipotecarias yesterday (Monday) was the first jumbo since late March and covered bond bankers are hopeful that there will now be further supply given that, with spreads tighter post-ECB, issuers will now be ready to pay the price necessary to tap into buoyant demand for spread product.

Santander is expected to price the first benchmark Spanish covered bond since June 2008 at the tight end of guidance this (Monday) afternoon, riding a wave of positive sentiment in the market sparked by the European Central Bank’s announcement last Thursday of a Eu60bn plan to buy covered bonds.

The debut cédulas hipotecarias issued last week by Barclays Bank SA, the Spanish arm of the UK banking group, are part of a wider funding strategy of “maximising securitisability” of the bank’s balance sheet, a treasury official at the issuer told The Cover.