Covered bond issuance is off to a strong start with at least 12 deals being marketed from issuers across Europe.
Societe Generale analysts reported that more than €15 billion ($19.4 billion) has been issued in the first days of the year, which has pressured covered bonds spreads.
"There is definitely the risk of overcrowding, as two originally announced deals have been postponed," SocGen analysts said in a research report. "The strong supply puts pressure on secondary spreads and as a result this quick pace cannot last."
Among the deals listed in this first week of 2011 are a €1 billion, five-year mortgage pfandbrief from Münchner Hypothekenbank; BNP Home Loan's 10-year, €1.75 billion deal; Compagnie de Financement Foncier 's five-year €1 billion offering and Groupe Caisses d'Epargne's four-year, €1.25 billion French covered bonds.
There are also ING bank's seven-year, €1.25 billion and ABN AMRO's seven-year, €1.25 billion Dutch covered bonds; DNB NOR's five-year €2 billion Norwegian covered bond, UniCredit Bank's two-year €1 billion public pfandbrief; Santander 's five-year, €1 billion and BBVA's three-year, €1.5 billion Cedulas; and Barclays Capital 10-year, €1 billion U.K. covered bond.
SocGen analysts said that the early rush to get the deals done can be attributed to a still nervous outlook for the European covered bond sector in 2011.
"Issuers want to complete their funding for 2011, and do not want to be disturbed by any possible sovereign spread volatility," analysts said. "This issuance behavior indicates a fearful view of most covered bond issuers for 2011."
