Portugal

Portugal attracted more than €5.5bn of demand for the first syndicated deal from a peripheral sovereign since mid-June on Wednesday.

Portuguese paper maker Portucel Soporcel on Monday said in a notice filed with the Luxembourg exchange that it will offer, in September, its second high yield bond to repay part of its 2013 notes.

Portugal’s short term borrowing costs dipped back into negative territory on Wednesday for the first time since May, as the third Greek bail-out package swung into action and Ireland cancelled debt.

Portugal overshot its maximum target at a dual tranche auction on Thursday, and was also able to reduce its borrowing costs on the shorter of the two tenors on sale.

Spain’s three month borrowing costs dipped back into negative territory and to a record low on Tuesday, as the eurozone periphery enjoyed a strong run of trading before Portuguese auctions later this week.

Fitch published a peer review of five Portuguese covered bond programmes on Wednesday, rating them all in the BBB basket. Though the quality of the cover pools is high, as reflected by one of the lowest portfolio loss rates in Europe, the risk of a disruption to the flow of payments is also high.

Caixabank’s plans to acquire Banco BPI will damage the issuer’s solvency and Moody’s has put the issuer rating on negative watch. Though the rating of both its mortgage and public sector covered bonds will also be dragged down, planned changes to rating agency’s methodology should ultimately mean the ratings end up unchanged.

The larger than expected quantitative easing programme announced by the European Central Bank on Thursday has turbo-charged the well-established bull flattening trend in covered bonds and trading volumes have tripled from earlier in the week. With the long end of French market now offering a tempting spread to OATs, real money buyers are set to return. And with Bonos and BTPs rallying hard, relative value between covered bonds and sovereigns should soon be restored in the Cédulas and Obbligazioni Bancarie Garantite markets.

Portugal’s Caixa Geral de Depósitos (CGD) issued a €1bn seven year covered bond, the longest seen from any Portuguese issuer in four years. And at 1% it was also the lowest coupon ever paid by a Portuguese covered bond issuer. The comfortably oversubscribed deal offered a new issue premium of 3bp to 4bp. However, rival bankers said the spread looked unattractive relative to government bonds which are should benefit from prospective central bank buying.

The national central banks of France, Portugal and Spain were reported buying covered bonds issued by banks from their own jurisdictions on Monday, said dealers. The amounts were small and the purchases were price sensitive, they added. Offers in Banca Monte Paschi Siena’s covered bonds were unchanged as its shares came under pressure following reports it may need to raise €1.7bn in fresh capital.

Banco Espirito Santo’s outstanding covered bond is bid only, and though little flow has been reported, dealers believe the offer is likely to be as much as 100bp tighter. In other news, Caffil’s bonds have performed well over the past month, outperforming the rest of the jurisdiction, partly driven by a new French law that limits the firm's litigation exposure by €66m which will considerably reduce the probability of a covered bond payment disruption.

232 people have responded so far to The Cover’s 2014 awards survey with as many as half being investors. The final results will be revealed in late September, but the preliminary outcome based on the un-weighted vote shows that the margin separating the top institutions and deals is thin in many categories, including prestigious awards such as Best Global House.