Covered Bonds

Pfandbriefbank Schweizerischer Hypothekarinstitute woke up the Swiss franc market on Tuesday by selling the first bond in almost a fortnight.

Private placements are expected to make up the bulk of Swedish covered bond paper throughout the latter half of 2021 and, with the Nordic summer holiday period coming to end, issuance from the region is expected to kick off ahead of the eurozone.

The Bank of Cyprus had its covered bond rating bumped up by Moody’s this week, as the agency considered the recent upgrades to the sovereign and issuer ratings, as well as “positive developments of the Cypriot housing market”.

The recent floods in western and central Europe could have an impact on covered bond pools. However, despite uninsured losses expected to total in the billions, covered borrowers are likely to remain insulated thanks to the diversification of their pools.

Market participants expect the Federal Reserve could address the topic of tapering at its meeting later today; however, the spread of the Delta variant may cause the central bank to put any talk on hold until its Jackson Hole Symposium next month.

Canada’s Equitable Bank covered programme received legislative approval this week, paving the way for a debut deal in the coming months.

Market participants do not expect banks to repay their targeted longer-term refinancing operations (TLTROs) borrowings early when a window opens next month, though the primary market would retain plenty of capacity to swallow up any increased issuance.

S&P has predicted that covered bond ratings will remain steady as European authorities phase out pandemic support, though some cover pools are more at risk than others.

Muenchener Hyp (MuHyp) was the sole representative in the Swiss franc market this week, as it tapped demand for long end paper.

The European Central Bank made a bold change to its monetary policy on Thursday, effectively pushing any prospect of interest rate hikes into the distant future, making them unlikely before the middle of the decade. Frank Jackman, Lewis McLellan and Burhan Khadbai report.

Communication is the only real policy tool where the European Central Bank still has wiggle room.

The ratio of encumbered assets over total assets increased by its largest ever margin last year, according to a report this week from the European Banking Authority, which attributed the increase to lenders making “extensive use” of central bank facilities during the pandemic.