Portugal

Banco Santander Totta negotiated an unexpected downgrade of its sovereign last week to price a Eu1bn three year obrigações hipotecárias issue yesterday (Monday), the first Portuguese benchmark covered bond in nearly three months.

Bancaja today (Monday) became the seventh Spanish issuer to tap the benchmark covered bond market in eight working days, while Portugal’s Banco Santander Totta is following through with a deal announced before Fitch last Wednesday cut its sovereign’s rating. Meanwhile, an Italian bank will soon be on the road.

In an exception to its covered bond rating criteria, Fitch yesterday (Thursday) downgraded Caixa Geral de Depósitos’s public sector covered bonds from AAA to AA+ because of its cut in the Portuguese sovereign’s rating from AA to AA- on Wednesday.

Banco Santander Totta is understood to be considering whether to proceed with launching a covered bond early next week, with market participants discussing the pros and cons of issuance not only for the Portuguese bank, but also for Spanish banks that have been rushing to market.

Bankinter today (Thursday) launched a Eu1bn three year deal that is the seventh cédulas transaction in as many days, including taps, while a downgrade of Portugal’s rating by Fitch yesterday (Wednesday) has been an extra factor for Banco Santander Totta to consider as it approaches the market.

Banco Bilbao Vizcaya Argentaria is today (Wednesday) in the covered bond market with the week’s ninth deal, after Deutsche Postbank earlier today priced a Eu1bn 10 year Pfandbrief that took supply of Eu500m-plus issues to Eu5.2bn over the first three days of the week. Meanwhile, Portugal’s Banco Santander Totta has announced plans to tap the market.

Caixa Geral de Depósitos is set to take Abbey’s place as the record ninth benchmark covered bond issuer this week, after the Portuguese but not the UK bank decided to brave the week’s widening market.

Next week promises to be as busy as this week’s record opening to a year, with two more issuers having officially announced plans for benchmarks in the past 24 hours on top of three outstanding mandates. Supply of Eu5.5bn yesterday (Thursday) took the week’s total to Eu10.25bn from seven deals, just short of the eight totalling Eu11bn in the busiest ever week for the covered bond market at the end of September.

With four new jumbos hitting the market this (Thursday) morning, the number of benchmark issues this week is second only to the last week of September. However, investors have expressed disappointment about what they called expensive spread levels.

Issuers are limbering up to launch the first benchmark covered bonds of 2010, with three institutions having mandated for transactions that could hit the market this week and others busy with preparations.

Standard & Poor’s has revised the outlook on Banco Santander Totta from stable to negative after the outlook on Portugal was changed from stable to negative.

Banco Espírito Santo nipped into the covered bond market to price a Eu1bn long five year obrigacões hipotecarias issue yesterday (Tuesday) afternoon. The issuer told The Cover that the transaction allowed it to achieve a goal it had set in the market’s darkest days.