LBBW mortgage Pfandbrief a safe bet, CM-CIC takes IoIs
Landesbank Baden-Württemberg seized upon a stable market to launch a debut benchmark mortgage backed Pfandbrief this (Monday) morning, with French issuer CM-CIC gauging interest for an inaugural obligations à l’habitat deal.
Covered bond bankers said the market was conducive to new issuance, pointing to developments such as a back-up in yields, with the 10 year Bund above 3% and Gilt and Treasury yields also off recent lows.
“There was a fairly sharp correction after the Greek news last week,” said a syndicate official, citing senior and subordinated debt indices around 25bp-30bp tighter, single name cédulas performing by around 10bp-15bp and some tightening in Italian covered bonds.
Another covered bond banker had a bullish outlook.
“The market is extremely positive for the right deal,” he said, describing such an issue as one coming from a national champion with a long dated maturity. A Eu2bn 10 year BNP Paribas obligations à l’habitat issue priced on Friday exemplified this, he said.
“The BNP deal was fantastic,” he added.
He highlighted as contributing to a positive market environment the emergence of quarter-end flows, negative net issuance, and Greece having “kicked the can down the road for a year”.
“I’m surprised more people haven’t come into the market,” he said. “The money is there. Nervous money. But it is there.”
The market was fairly calm this morning, however, according to market participants, with little spread movement despite some widening in credit indices following a declaration from Standard & Poor’s that a voluntary rollover of Greek debt would in its eyes constitute a selective default.
“We’re treading water today,” said a syndicate banker.
A public holiday in the US today is another reason why the market was quiet today, said bankers.
Easy first Hypothekenpfandbrief for LBBW
Landesbank Baden-Württemberg was in the market this morning with a Eu500m no-grow six year mortgage backed Pfandbrief that leads LBBW, Natixis, Royal Bank of Scotland and UniCredit have been marketing with guidance of 18bp-19bp over mid-swaps.
Orders exceeding Eu500m had been placed by 1230 CET, with the book continuing to steadily grow thereafter, according to a syndicate banker at one of the leads. There was little price sensitivity in book, he said.
“We still have orders coming in, and now we are mainly waiting on a few savings banks that have gone out to lunch,” he said. “But for us it already looks like a very successful deal.”
A syndicate banker away from the leads was confident the deal would go well.
“The pricing looks fair to me and it’s a rare name, more often than not coming with a public sector rather than mortgage format so I don’t see any issues with it whatsoever,” he said.
Crédit Mutel-CIC Home Loan SFH was taking indications of interest this morning for its first covered bond under France’s new obligations à l’habitat framework, after having monitored the market for some time. Leads Barclays Capital, BNP Paribas, Danske Bank and HSBC are whispering a five year issue in the high 50s over mid-swaps area, according to a syndicate banker on the deal.
The level and choice of maturity were deemed acceptable by a syndicate official away from the leads.
“Five years is the right point of the curve for them,” he said. “The level looks OK-ish, but not particularly generous.”
He compared it with a Eu2bn five year obligations à l’habitat issue for BPCE SFH that was re-offered at 63bp over mid-swaps on 3 May and was trading at around 56bp over.
“But we have the CM-CIC curve tighter than that,” he said.
Finland’s OP Mortgage Bank priced a Eu1bn no-grow seven year deal at 48bp over mid-swaps on Friday. The re-offer spread represented the middle of guidance of the 48bp over area. The leads did not disclose the size of the order book.
Around 60 accounts participated in the transaction, according to a syndicate official at one of the leads – Barclays Capital, BNP Paribas, HSBC, Pohjola and UBS.
Germany took 59%, the Nordics 14%, the Benelux 10%, the UK 8%, France 5%, and eastern Europe 2%. Asset managers and insurance companies were allocated 45%, banks 43%, and central banks and official institutions 12%.
Syndicate officials away from the leads on Friday said that OP’s deal struggled compared with BNP Paribas’ obligation à l’habitat the same day, and a covered bond banker today suggested that seven years had been the wrong choice of maturity.