Covered Bonds

BNP Paribas sold its first Swiss franc green bond on Tuesday, navigating concerns over the non-preferred format to twice bump up the size of its Sfr230m ($230.8m) deal. It was joined in the market by Pfandbriefzentrale, which printed two tranches of covered bonds.

Sentiment in the sovereign, supranational and agency sector was broadly supportive on Monday ahead of a smaller than expected 30 year OAT sale on Tuesday and, more importantly, the European Union’s next slug of issuance under its Next Generation programme that is due next week, said traders.

Compagnie de Financement Foncier responded to investor demand for defensive maturities on Monday by issuing the first five year covered bond from a core European bank this year. Although the super-sized deal attracted substantial interest, the leads said it would be incorrect to conclude that market sentiment had turned positive.

GlobalCapital invites market participants to submit nominations for this year’s Covered Bond Awards, which recognise excellence in the industry over the past year.

Banks that have access to diverse pockets of demand will be far better equipped to deal with any contraction in central bank liquidity, which could occur if high inflation spooks policy makers and markets.

UniCredit plans to make labelled financing a regular part of its funding across the group, following the launch of its debut labelled bond this week. Its first deal proved popular as it stacked up more than €3.25bn of demand.

Crédit Agricole SFH and Coventry Building Society managed to achieve their price and size targets in the covered bond market on Thursday with oversubscribed deals. However, investors displayed plenty of price sensitivity.

Eight years after publishing its first consultation paper the Spanish Treasury has set out its hotly anticipated draft covered bond law which market participants greeted enthusiastically, largely because it comprehensively addresses all the main features of the EU’s Covered Bond Directive. However, it contained a number of surprising and potentially contentious proposals.

Canadian Imperial Bank of Commerce achieved a roaring success with its $2bn five year 144A deal priced on Wednesday, the first from a Canadian bank in over a year. CIBC managed to achieve a size and spread that would not have been possible in euros and showed the importance of paying attention to key currency markets outside Europe.

Credito Emiliano managed to attract a robust order book for its €750m seven year covered bond that was sold on Wednesday, following an extended marketing period that enabled price discovery. At the same time Coventry Building Society mandated leads for only the second UK covered bond in euros to be issued this year.

Following the pricing of Tuesday’s deal from the European Union, bank traders reported good profit taking in covered bonds, Laender paper and, most conspicuously the previous issue of EU bonds. Despite that, spreads were steady.

Finely tuned pricing was the order of the primary market last week, with a drop in volatility leading to a decline in average movements from initial price thoughts. But despite the VIX falling to its lowest level since February 2020, there were still signs of price sensitivity — and average new issue concessions grew in the most affected markets.