Covered Bonds

BN Boligkreditt has opened the books on its debut Eu1bn five year covered bond and by lunchtime had attracted some Eu600m of orders at guidance of the 15bp over mid-swaps area, with volatile equity markets providing an unhelpful backdrop.

Bad news hit French and German covered bonds this morning, stymieing issuance plans, but in spite of a sharp sell-off in equities one Spanish issuer is said to be close to launching the first cédulas of the year.

DnB Nor brought the second week of the covered bond year to a successful close today, pricing its five year deal in the middle of the 11bp over mid-swaps area guidance and at a size of Eu2bn. But whether next week’s supply will match the Eu8bn plus of the past few days remains unclear.

With the covered bond market feasting on an average of more than a benchmark sized deal a day, concerns about oversupply leading the buy-side to turn its nose up at deals have resurfaced. However, investors have so far sampled every dish put in front of them and although some deals have been devoured more quickly and in larger quantities than others, issuers who have managed to get deals done this week are largely looking back with relief.

The Cover understands that the UK’s covered bond framework is a step closer after the Financial Services Authority, which will be responsible for supervising the Regulated Covered Bond regime that HM Treasury will implement on March 6, yesterday revealed the timetable for its part in the process.

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BNP Paribas’ Eu2bn three year covered bond was priced this morning, although there are doubts over whether this represents a full reopening of the French market, with pricing still disjointed even within jurisdiction due to varying collateral types, name differentiation and the choice between structured covered bonds or the old obligations foncières.

Kommunalkredit Austria priced a Eu1bn four year covered bond at mid-swaps flat this morning, as expected, but while the transaction shows how the most sought after names can avoid the worst of the spread widening, questions remain over what whether anything can be printed any tighter.

The books have opened on DnB Nor Boligkreditt’s five year benchmark covered bond, and the deal’s swift progress has further demonstrated the divisions in the market, which is in particular benefiting established names.

Bank of Montreal is set to price its Eu1bn five year covered bond at 24bp over mid-swaps today, paying 4bp more than Royal Bank of Canada did for its 10 year deal last week, after suffering from the wider than expected pricing of Banco Espiríto Santo’s Eu1.25bn three year deal at 20bp over on Tuesday.