Münchener Hypothekenbank is adding Eu125m to a 2016 jumbo for the second time in two weeks on the back of Asian demand, while syndicate bankers were this (Tuesday) morning working through the implications of rating actions including downgrades of Italy and Spain.

Market participants said sovereigns had been left unscathed by Moody’s downgrades of Italy, Portugal and Spain, along with three other countries, late Monday night. The rating agency also changed the outlook to negative on France, Austria and the UK.

“In general it doesn’t seem that downgrades have that strong an impact anymore,” said a syndicate official. “Moody’s just did what S&P already did weeks ago.”

Another syndicate official also said there had been little, if any, impact on the sovereigns, noting that Spain was some 10bp wider.

“The market is very much on hold for tomorrow,” he said, adding that the pipeline was quieter ahead of a finance ministers’ meeting on Wednesday regarding approving Greece’s second bailout package.

“It all depends on what happens Wednesday, and whether there is any sort of resolution,” he said, “but Thursday would be the window.”

But any peripheral covered bond issuance projects for this week may have been complicated by the rating actions — Spanish banks were also cut by Fitch and Standard & Poor’s (see separate article). One banker said that they “made everyone have a little bit of a think” given possible knock-on effects for covered bond ratings and features such as swaps, which could need to be replaced.

“It creates uncertainty,” he said.

Spain’s Bankia had been mentioned as a possible new issue candidate for this week, for example, with syndicate officials also having yesterday (Monday) said that the prospects for Italian issuance had improved.

A syndicate official said that yesterday’s rating actions should not have much of an effect on demand, given good levels of liquidity and peripheral regions being able to offer a pick-up.

Catalunya Banc (CatalunyaCaixa) is buying back Eu336m of covered bonds after some 11% of a Eu1.5bn 4.875% 2017 issue and around 10% of a Eu1.75bn 3.5% 2016 issue were tendered. The purchase prices were 94% and 93%, respectively.

The Spanish bank on 2 February launched a tender offer that targeted the above covered bonds and 34 tranches of securitisations.

The take-up rate is higher than an acceptance rate of just under 8% for a Banco BPI tender offer that closed on Thursday, with investors holding Eu75.65m of a Eu1bn 3.25% mortgage-backed deal selling them to the Portuguese bank for 85% of par value.

A covered bond analyst described the level of participation in CatalunyaCaixa’s buyback as fairly low, but said the result “is not that bad after all”. Capital gains could stand at around Eu20m, he said.

The outcome indicated that multi-cédulas tenders are probably still unlikely to crop up in the near future, he suggested.

Münchener Hypothekenbank is today pricing a Eu125m tap of a 2.5% January 2016 jumbo Pfandbrief to take the total issue size to Eu1.25bn. Barclays Capital, DZ Bank, LBBW, Nomura, UniCredit and WGZ were the lead managers.

Today’s increase comes after the issuer on 31 January tapped the same bond for Eu125m.

Rafael Galuszkiewicz, head of treasury at Münchener Hypothekenbank, said that Asian demand drove both taps, with the first Eu125m increase going mainly to non-Japanese investors and this morning’s to a broader range of Asian accounts. Covered bonds from strong issuers in strong jurisdictions appeal to Asian investors, he said.

“I think demand for these types of covered bonds will increase,” he said. “Japanese investors are very conservative and while they are not averse to Pfandbriefe, as long as they are not investing fresh cash in European sovereigns they remain on the sidelines in covered bonds.”

But Galuszkiewicz is optimistic about the return of Japanese investors to the covered bond market.

“I think it is a question of not if, but when,” he said.

And Marko Nikolic, head of covered bond origination at Nomura, said that given the much broader reach of the covered bond market today it makes sense to explore the possibility of Samurai covered bond issuance.

“A covered bond in the ‘samurai’ format would reach a broader Japanese investor base than Euroyen covered bonds, issued off MTN programmes, that have been the mainstay of Japan-targeted supply so far,” he said, adding that such a move could take some time as it would need approval from the Japanese regulators.

There has not been any covered bond issuance by Japanese financial institutions, although government-owned Development Bank of Japan has spearheaded a push for covered bond legislation in the country.

“If Samurai issuance by international issuers takes off, it could pave the way for domestic issuers to look at the possibility of launching covered bonds once again,” said Nikolic.

Galuszkiewicz said that this morning’s tap was prompted by reverse enquiry and some short positions, and that demand for both taps exceeded the individual deal sizes.

“It is a luxury problem to have, but we did not want to size larger taps,” he said.

A syndicate official at one of the leads said that there was good demand for the tap, adding that the issuer is a good name and that there has not been much benchmark German Pfandbrief issuance this year. The last such supply, before Münchener Hypothekenbank’s taps, was a Eu500m four year issue from Deutsche Pfandbriefbank (pbb) on 10 January.

Galuszkiewicz said that the issuer had at the end of 2011 already made clear that it would not be issuing new Pfandbriefe up to four years given the availability of long term funding via the ECB.

“Issuers like Münchener Hyp can access the capital markets without any problems, but the reality is that LTRO funding is much more attractive in economic terms,” he said.

The taps of its January 2016 jumbo Pfandbrief demonstrate Münchener Hyp’s access to wholesale term funding, said Galuszkiewicz, with increases the only way for investors to get hold of short dated benchmark supply from the issuer.