Covered Bonds

Flughafen Zürich sold its first deal this week since it lost its double-A rating in July, finding the opportunity to price a Sfr200m bond at an “aggressive” level.

LBBW has hired Buck Khim Sim to join it primary markets team as part of its strategy to build up its presence in Asia.

The sustainable finance market clamoured for a Taxonomy to tell it what was green. Now it’s here, many are finding the answers constraining or simplistic. Alarmingly, the Taxonomy is also perpetuating the very thing it was supposed to root out — greenwashing.

Henrik Stille, senior portfolio manager at Nordea Asset Management, talked to GlobalCapital about the covered bond market and the incredible returns that his strategies have delivered this year, from traditional long-only solutions to innovative leveraged alternatives.

Covered bond participants will be looking eagerly to the European Central Bank’s policy meeting this Thursday in anticipation of a host of new stimulus measures, the most important of which is likely to be the targeted long term refinancing operation, where lower rates for longer are expected to impinge on supply.

Tight spreads, low yields and aggressive central bank action make covered bonds a 'low conviction' asset class, according to one major investor. But there is some scope for selective performance in relation to debut issuers and deals from Japan, where a legislative framework is hoped for.

Green bond specialists have criticised the buildings section of the European Union’s proposed sustainable finance taxonomy as impractical as it creates unhelpful incentives that exclude most bank financing, including green senior unsecured, RMBS and covered bonds.

Münchener Hypothekenbank (MunHyp) made use of an impressive spread tightening in the Swiss franc market to follow up Pfandbriefbank’s monthly issue with an even tighter covered deal of its own.

The EU’s Taxonomy Regulation for sustainable activities regarding property represents a brutal disclosure standard. Though some investors will grapple with the collateral implications, others told GlobalCapital on Thursday that the taxonomy should not bar them from investing. But even so, several bankers and a rating agency specialist predicted that, if left in its present format, the draft would be wholly counterproductive.

Investors holding the covered bonds issued by NordLB in Luxembourg said on Wednesday that they were concerned about prospective rating downgrades after the bank said it would be wound down and in the wake of Fitch’s announcement on Tuesday that it had withdrawn its covered bond rating.

There are a lot of positive things to say about the European Union’s draft Taxonomy of Sustainable Economic Activities, but as far as buildings are concerned, its aims are too ambitious. Without a last minute reprieve, it risks killing the nascent market for green wholesale property finance.

ICE Benchmark Administration Limited (IBA), the administrator for Libor, will consult on its intention to cease the publication of the majority of dollar Libor rates after the end of June 2023 — 18 months later than originally planned.