Covered Bonds

Stadshypotek on Tuesday became the first Swedish bank to issue a euro benchmark covered bond this year, with its first euro deal secured on Norwegian mortgages. The bond was priced at the tightest spread for any covered bond issued outside the eurozone since May 2019.

Finland’s Oma Saving’s Bank has mandated leads for a covered bond and follows OP Mortgage Bank which last week issued the first Finnish covered bond since January.

The Swiss Banking Association has asked the country’s financial supervisor to consider setting up a covered bond regulatory framework that would put structured covered bonds on a par with other legally based covered bonds, such as Swiss Pfandbriefe.

Société de Financement Local (SFIL) was over 5-1/2 times covered as it brought its long-awaited debut green bond to the market on Friday, allowing it to price well inside fair value.

An improvement in risk appetite led to a rates sell-off and a spike higher in yields this week, paving the way for an explosion of covered bond supply that went far beyond the volume expected.

French agency Caisse des Dépôts et Consignations finished its 2020 syndicated funding programme with a visit to the Swiss market this week, printing an extremely tight deal through the high quality domestic covered bond curve.

OP Mortgage Bank issued a rare Finnish covered bond on Thursday, pricing the deal flat to where German issuers would have been expected to come, with the sizeable €1.25bn 10 year offering and an alluring pick-up to the issuer’s highly squeezed curve.

Despite lower yields and some price sensitivity, Bawag found solid demand for its 15 year Pfandbrief, which was issued on Thursday flat to the curve.

HSBC Canada plans to issue its inaugural deal in euros and though the bond is not expected until next year at the earliest, there is a possibility that other Canadian banks could pre-fund before Christmas if strong market conditions last.

Austrian lender Bawag has taken advantage of the sell-off in rates markets to mandate leads for a 15 year covered bond which, like de Volksbank’s recent deal, should also deliver a positive yield.

De Volksbank took advantage of a sell-off in the rates market to issue a 20 year covered bond on Wednesday and, thanks to the extra yield it offered enjoyed good demand, albeit quite sensitive.

The ease with which banks have been able to deploy retained covered bonds for repo funding with central banks has aggravated liquidity risks and undermined regulations that were designed to shore up liquidity management practices exposed as inadequate during the 2008 financial crisis.