Covered Bonds Dominate European Sales as Corporate Surge Fizzles

Covered bonds dominated Europe’s corporate debt market as banks sold the relatively safe securities after yesterday’s surge in non-financial deals fizzled out.

Norwegian mortgage lender Terra Boligkreditt AS offered 650 million euros ($812 million) of seven-year covered bonds while Deutsche Hypothekenbank AG of Germany sold 500 million euros of the asset-backed securities with a five-year lifetime, according to bankers involved in the transactions.

Aareal Bank AG (ARL), a Wiesbaden, Germany-based real-estate lender, is issuing 500 million euros of five-year covered bonds.

Yesterday’s short-lived rally in European credit following news of the 100 billion-euro bailout for Spain’s banks was enough to trigger the busiest day for corporate bond sales since February. General Electric Capital Corp., a unit of the U.S. conglomerate, together with phone operators France Telecom SA, and Telecom Italia SpA were among borrowers that took advantage of the boost in investor sentiment to raise money.

In other deals today, the European Financial Stability Facility is raising at least 1 billion euros through a sale of bonds due April 2037. The bailout fund has top credit ratings from Moody’s Investors Service and Fitch Ratings and is graded a level lower at AA+ by Standard & Poor’s.

Among other unsecured fundraisings, K+S AG (SDF), Europe’s biggest potash producer, is selling 500 million euros of 10-year bonds, its first public issue in almost three years, a banker with knowledge of the transaction said. French lender Banque Federative Du Credit Mutuel SA offered five-year senior, unsecured bonds due June 2017.

To contact the reporters on this story: Hannah Benjamin in London at hbenjamin1@bloomberg.net; Louise Meeson in London at lmeeson@bloomberg.net

To contact the editor responsible for this story: Paul Armstrong at parmstrong10@bloomberg.net

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