Covered Bonds

The covered bond market could be on the brink of a dramatic recovery that few could have imagined only a fortnight ago, with not one but several issuers preparing new jumbos for launch next week.

The stability in financial markets this week prompted guarded optimism that the covered bond market would reopen for its usual autumn season in September, albeit in a nervous manner.

A conference call between banks yesterday (Thursday) to revise jumbo market-making standards narrowly averted a complete breakdown of trading in covered bonds.

Royal Bank of Canada plans to launch what is expected to be the first covered bond from the country, a euro denominated jumbo issue, after a roadshow in September.

On Wednesday Aareal announced that Christof Schörnig was leaving its management board to pursue new career options. But although market participants said that was the true reason, the resignation of a board member responsible for treasury, credit treasury and investor relations spooked the market.

Market-making in covered bonds on the EuroCredit MTS electronic trading platform remained sporadic this week, but liquidity through telephone market-making was considered satisfactory given the dislocations elsewhere in the financial markets.

Norway’s Terra Gruppen of around 80 savings banks has mandated UBS to arrange Terra BoligKreditt’s covered bond programme.

JP Morgan has hired Alberto Basu from ABN Amro to run its fledgling global covered bonds business.

Hypo Real Estate is buying Depfa for Eu5.7bn, in a move aimed at giving the two the critical mass necessary to win a greater share of the booming infrastructure and real estate businesses.