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downgrades after the bank said it would be wound down and in the wake of Fitch’s announcement on Tuesday that it had withdrawn its covered bond rating.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.

Covered bond bankers have swept aside a series of negative reports on the outlook for the mortgage market from the European Banking Authority, European Central Bank and rating agencies, arguing that covered bonds will remain unassailable, come what may.

Santander UK has requested investors’ consent to alter the terms of four sterling covered bonds from referencing Libor to Sonia. The borrower will use the same method it used when converting its additional tier one notes for the fixed rate deals, while changing the floating rate notes will be a simpler task.

The first move has been made to consolidate the alphabet soup of industry bodies that try to raise standards in corporate reporting on environmental, social and governance issues — an essential feedstock for responsible investing. More mergers are likely as the private sector races to strengthen its influence before regulators take control.

Spanish pharmaceutical bank specialist, Bancofar and its parent, Banco Caminos, which provides finance to civil engineers, have set up small covered bond programmes that have been assigned an Aa1 rating by Moody’s.

Covered bond traders are paring back inventory as they approach the end of the year, though there are a few sectors of the market where they intend to hold positions. High redemptions in the first half of the year will support spreads but January’s issuance glut may not see a rise in new issue premiums.

The outlook for Asian covered bond supply will have improved slightly in the wake of Tuesday’s deal from United Overseas Bank, particularly among Singaporean lenders. But issuance from Australia and New Zealand is expected to be more limited, reflecting their banks' priority to get ahead with regulatory funding.

After a decade of slumber, the market for euro-denominated Hungarian covered bonds could be poised to reopen. Hungary covered bonds may have a low country ceiling credit rating but the market is well protected and could offer positive yields.