Covered Bonds

Helped by the rarity of UK issuance in euros, Yorkshire Building Society’s seven year euro deal on Tuesday was one of the most oversubscribed covered bonds of its size ever launched by any UK issuer, and was priced flat to fair value.

At around €300bn, France is the world’s second largest covered bond market. Yet, unless issuers consider pre-funding for bonds that fall due early next year, supply prospects for the remainder of this year are dim. This, along with stability in the French economy, property market and covered bond ratings, should stand the asset class in good stead.

Yorkshire Building Society (YBS) has mandated leads for the first euro covered bond from the UK since January, My Money Bank has also mandated and, after concluding a roadshow, Sumitomo Mitsui Trust Bank is due this week too. All three bonds will offer a temptingly high spread.

By offering a hefty pick-up over national champions, Bluestep Bank, a Swedish non-standard mortgage lender, attracted a hefty order book for the second deal from its newly established covered bond platform this week.

The ECB is mulling the idea of green Targeted Longer-Term Refinancing Operations to boost green lending. It's a noble aim — but it should work with the policies it has first, if it is serious about environmental impact.

Syngenta, the agricultural chemical and seed company, returned to the Swiss franc market this week for its second Swissie bond of the year — a blowout three year deal that surpassed the market’s expectations.

DNB Boligkreditt on Thursday issued its first euro covered bond since January 2019 in large size, pricing inside its own curve — once again underscoring the strong technical backdrop to the market.

National Bank of Greece (NBG) has become the lowest rated bank to issue green debt, after winning two times as much demand as it needed for a €500m senior bond on Thursday. The trade formed part of a flurry of green issuance in the FIG market, alongside new deals from Banque Fédérative du Crédit Mutuel and Mizuho Financial Group.

Fédération des Caisses Desjardins du Québec (CCDJ) issued the first Canadian covered bond in dollars since May on Wednesday flat to where the major Canadian banks issue senior unsecured debt.

After mandating leads on Monday, Fédération des Caisses Desjardins du Québec (CCDJ) opened order books on Wednesday for its first dollar deal in over a year and the first dollar covered bond since May. In the meantime, investors were waiting for Sumitomo Mitsui Trust Bank's first deal amid renewed hopes that a core European issuer will mandate before the end of the week. With redemptions mounting, there are hopes that other issuers will pounce on the market early in the fourth quarter.

Ireland won kudos for the swift economic recovery that followed the sovereign debt crisis, but with a considerable portion of residential mortgage loans overdue or restructured, its housing market was in a terrible state even before the impact of Covid lockdowns, let alone the peril a disorderly Brexit may bring.

The European Central Bank's decision to withdraw repo facilities for structured covered bonds from the start of next year may disincentivise issuers from structuring further deals without a law.