The primary market for European covered bonds saw substantial volume sold in the first month of the year.

According to Societe Generale analysts, €8.5 billion ($11.5 billion) was sold over the past five trading days. Over the previous week, the market sold €10 billion. "We saw issuers raising premiums to get bonds sold," SocGen analysts said in a report. "New bonds were priced 10 basis points to 20 basis points over the secondary market. We also saw good investor differentiation between issuer ratings."

Analysts said they expect covered bond sales to slow, as investor saturation rises in January. Among the issues that priced over the past five days was a €1 billion Austrian covered bond issued by Erste that priced at 72 basis points over mid-swaps.

SEB issued a €1.25 billion Swedish covered bond that priced at 39 basis points over mid-swaps. Swedbank also issued a €1 billion Swedish deal that priced at 44 basis points over.

Bankinter issued a €500 million Cedula (Spanish covered bond) that priced at 310 basis points over mid-swaps.

Intesa Sanpaolo priced its €1.5 billion Italian covered bond at 180 basis points over mid-swaps. Banco Popolare also priced a €500 million Italian covered bond at 170 basis points over mid-swaps. Abbey National's €750 million U.K. covered bond priced at 150 basis points over.

BayernLB priced its €1 billion public Pfandbrief at 12 basis points over mid-swaps. DEXMA priced a €1 billion public Obligation Foncière (French covered bond) at 100 basis points over. Credit Agricole priced a €1 billion French covered bond at 43 basis points over.

Coverd Bond Volume

Meanwhile, according to Dealogic figures covered bond volume has reached a year-to-date record of $48.7 billion so far in 2011, a 25% rise versus the $39.1 billion issued during the same period in 2010 and surpasses the previous year-to-date record of $39.5 billion that was set in 2006.

Dealogic also said that covered bonds had its highest annual volume in 2010 with $358.3 billion. France led the issuance volume, making up a 19.8% ($70.8 billion) share of the market. 

Germany followed with 15.4% ($55.3 billion). Last year marked the first time on record Germany had not led annual global covered bond volume, according to Dealogic.

So far this year, France has issued nine covered bonds worth $10.9 billion while Germany has sold $8.3 billion via 13 deals, Dealogic reported.

The average deal size of a covered bond in 2011 is $919 million, nearly three times the $318 million recorded in 2010 year-t0-date. 

Dealogic figures showed that there have been 28 covered bonds worth $1 billion or greater that have priced in 2011 versus merely 16 over the comparable period in 2010.


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