UK

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.

Coventry Building Society has successfully priced its inaugural covered bond eight basis points inside where Yorkshire Building Society was able to issue only a few days earlier.

The asset backed security market showed signs of recapturing some of its old swagger this week, playing host to a wide range of transactions and preparing to take down the largest volumes since the onset of the credit crisis in 2007.

Abbey National Treasury Services has beaten Coventry Building Society to be the first to follow a highly successful seven year sterling issue from Yorkshire Building Society on Tuesday. At 10 years in maturity, Abbey’s new £1.25bn deal would, until recently, have been at the shortest end of the sterling curve.

Barclays Bank convinced more than 120 accounts to participate in a Eu1.5bn five year print on Wednesday, which leads said could have been larger, given the deal was almost 2.5 times oversubscribed.

Following positive sell-side reaction to the joint review and consultation on UK covered bond regulation by the Financial Services Authority and HM Treasury, buy-side reaction has been more measured. Investors say transparency risks being diluted over time and the current legal status of covered bonds lacks clarity. But, combined with the European investor initiative, which may have repercussions on the ECB collateral framework, it is clear that all authorities are working in favour of investors and this can only be good.

Moody’s has assigned a triple-A rating to Coventry Building Society’s £1.5bn Series 1 and £500m Series 2 covered bonds. The high amount of interest-only loans, loans to self employed borrowers and those with no income verification is offset against conservative average loan to values and high overcollateralisation

UK prime RMBS from Northern Rock and Royal Bank of Scotland have achieved good momentum, with a total of around £2.8bn placed in the market on Wednesday, and healthy oversubscription. But spreads are moving sideways rather than tightening, Northern Rock paid a plentiful premium, and RBS moved to the wide end of guidance.

Yorkshire Building Society’s successful £750m seven year print proved the sterling market is receptive to short as well as long tenors. The split rated, short dated deal was priced at the tight end of guidance while reaching maximum deal size, and in its wake Coventry Building Society has begun roadshowing an inaugural triple-A rated sterling covered bond to UK investors.

UK issuance continues to flow, favoured by analysts and bolstered by a growing domestic bid. Barclays Capital came to market on Wednesday with a successful five year deal in euros. Q1 supply from the UK has been double that of the previous year’s first quarter total, and represents 10% of all covered bonds issued in 2011.

Lloyds TSB Bank convinced 135 accounts to participate in a comfortably oversubscribed Eu1.75bn five year issue on Wednesday, which was priced 5bp inside of guidance. Covered bond traders report, however, that the bonds have widened in the secondary market, with other issues this week also underperforming.

French, UK and German names were active on Wednesday, continuing the shift away from southern jurisdictions. Lloyds launched its second euro deal of the year and Nordea became the latest borrower to tap the dollar market. UniCredit ensured peripheral Europe was represented, mandating for a Eu500m tap of an outstanding 2017 trade.