Covered Bonds

The Baltic covered bond market is expected to take another stride forward with the advent of Latvia’s draft law, which currently is being debated in parliament. At the same time, the European Bank for Reconstruction and Development (EBRD) has been working closely with the Bulgarian, Croatian and Ukrainian authorities to help develop the basis for their own covered bond laws.

Wüstenrot Bausparkasse attracted exceptionally strong demand for its seven year Pfandbrief launched on Tuesday, causing the issuer to increase the deal’s size from an originally planned sub-benchmark size to benchmark. In so doing it further improved the scale and quality of the order book reflecting improved regulatory treatment and index inclusion for the deal.

Secondary covered bond market turnover has fallen since the European Central Bank's Covered Bond Purchase Programme (CBPP3) began, with the ECB accounting for an unprecedented proportion of overall turnover, according to a report published in the European Covered Bond Council’s fact book, published last Friday.

The European Central Bank's Isabel Vansteenkiste welcomed a proposal for green Targeted Longer-Term Refinancing Operations (TLTROs) on Monday, but talked through what she saw as some concerns with the idea.

Caffil attracted robust demand for its fifth covered bond this year on Monday, thanks to the positive yield on offer at the unusual 15 year maturity. But with a wave of cheap European Union 15 year supply expected to surface before long, other issuers may try to follow Caffil's lead and jump in ahead.

Wüstenrot Bausparkasse mandated leads on Monday for a seven year Pfandbrief in sub-benchmark size. The German building society’s transaction is set to emerge ahead of another from Bausparkasse Schwäbisch Hall which is also due soon.

Deal arrangers expect bank bond supply will peter out after a flurry of deals this week. Issuers have been enjoying fantastic conditions, but most of them have finished their funding plans early so they can lay low throughout a much-feared fourth quarter. Tyler Davies and Bill Thornhill report.

Despite robust redemption volumes, the outlook for covered bond supply over the remainder of 2020 is poor with some bankers expecting no more than a dozen euro deals.

The European Central Bank bought more covered bonds in September than it has done for months and still faces a mammoth task to replace deals due to be redeemed this year. With eligible issuance unlikely to much exceed €10bn, a squeeze of epic proportions is in store.

Sumitomo Mitsui Trust Bank (Sumitr) mustered a reasonable order book for its debut contractual covered bond issued on Wednesday, and was able to meet its minimum size ambition at a fair spread.

My Money’s Bank’s 10 year Obligations Foncières issued on Wednesday attracted strong demand, largely due to the spread on offer.

The German Ministry of Finance has requested feedback on a draft amendment to the Pfandbrief Act that seeks to bring the country’s laws into line with the EU covered bond directive. The most contentious aspect is the inclusion of a soft bullet maturity.