Covered Bonds

The champagne was out for the launch of the first ever jumbo ship Pfandbrief, HSH Nordbank’s two year deal, which attracted more than Eu3bn of orders by midday CET and could be priced at the tight end of guidance.

Royal Bank of Canada (RBC) restarted 10 supply by boldly announcing such a mandate yesterday (Monday), attempting to follow the success of its debut five year with a 10 year euro jumbo in the face of a market that had proved hostile to both structured covered bonds and longer dated maturities.

Skandinaviska Enskilda Banken AB (SEB) has opened the books on its first euro covered bond, a three year jumbo with pricing set at 3bp over mid-swaps, the tight end of the 4bp guidance. The deal proved extremely popular with investors, gathering well in excess of Eu4bn of orders by midday.

Compagnie de Financement Foncier (CFF) has mandated Calyon, HSBC and Natixis for its benchmark sized obligation foncière to be launched in the near future. Lead managers are believed to be keeping their options open on the maturity of the deal.

This morning saw an uneven response to the ECBC’s decision on market-making announced on Friday, with some banks failing to follow the decision fully. Reports are coming in of some banks offering tickets of only up to Eu5m or Eu10m. Some market participants also noted a lack of willingness to offer prices on US covered bonds in some quarters.

Apparently gentlemen prefer blondes but marry brunettes. Well from a performance perspective, investors should buy covered bonds from more volatile jurisdictions in the short run and then dump these for more stable products in the secondary market.

League tables are often criticised for being purely quantitative measures that say nothing about the quality of a transaction’s execution. The Cover has therefore analysed the trading levels versus swaps of 100 of 2007’s new benchmark issues five days after launch and ranked lead managers according to the performance of those deals.

We are in the process of finalising the league tables for 2007. Please send any queries or submissions to thecover@coveredbondnews.com by Thursday 3 January.