UK

Coventry Building Society got the covered bond market off to strong start on Monday morning launching its first euro trade amid a general upturn in sentiment. Core Europe is also showing signs of life, with UniCredit Bank Austria mandating for a public sector backed transaction.

Guidance on Nationwide’s Silverstone RMBS is identical to where Santander UK placed Holmes 2011-3 three weeks ago, reflecting Silverstone’s status as a top tier issuer in the UK market, as well as sluggish spread movement in the wider senior RMBS market.

Nationwide had the audacity to announce, open and price a jumbo deal hours before Thursday’s potentially market moving announcements from the ECB and Bank of England. But its boldness was rewarded as the issuer printed €1.5bn instead of the targeted €1bn, showing the market what could be achieved with the right name, even in the narrowest of windows.

Nationwide’s decision to brave the waters with a €1.5bn five year clearly paid off, with the €2.4bn book sending a strong signal to other borrowers to take advantage of the funding window.

The prospect of another ECB covered bond purchase programme (CBPP) has kept issuers and investors in risk off mode all week, but Nationwide bucked this trend on Thursday and took the market by surprise with a €1.5bn five year deal. The offering is the first €1bn-plus, euro covered bond in more than a month and it stands in stark contrast to last week’s sub-jumbo deals — all on a day that few picked out as a window.

Covered bond market participants are firmly focused on Thursday, when the ECB could announce another round of covered bond buying. Regardless of market conditions, a deal on Monday was always going to be unlikely because of German holidays. But the weak market opening has made a deal between now and the ECB meeting more tricky — particularly for the smaller names that dominate the pipeline. Covered bond traders reported a very quiet morning, with customers unwilling to take a position before Thursday.

Moody’s and Fitch have downgraded the senior rating of Clydesdale Bank. Though the borrower’s triple A covered bond rating remains intact, the cuts are unhelpful in the context of a recent mandate and a roadshow of its newly established covered bond programme.

German, French and UK issuers launched trades on Tuesday as indices tightened and stock markets rose on hopes that a solution to the eurozone debt crisis had been outlined over the weekend.

Santander UK’s Holmes 2011-3 RMBS picked up $2bn of demand in the ‘A2’ dollar tranche, despite challenging conditions in wider markets continuing.

Crédit Mutuel-CIC Home Loan SFH kept the euro market alive on Tuesday with an increase of an outstanding 10 year trade. The €200m tap is the sum total of primary issuance in the last week, though Canadian Imperial Bank of Commerce proved the dollar segment’s resilience to market volatility by taking supply over the same period to $7bn.

Santander UK has launched Holmes 2011-3, ending a two month drought in the public European ABS market. Market participants had been begging for a large multi-currency master trust deal to kick off a revived market, and Holmes fits the bill.

UK bank shares fell on Monday after the Independent Commission on Banking recommended ring-fencing the retail operations of UK banks in its final report. Mortgage lending will be permitted within the ring-fence, as will wholesale funding. However, the ICB proposes a wholesale funding limit, which could address concern that if mortgage backed assets such as covered bonds are included in the ring-fence, asset encumbrance would reach unacceptable levels.