Covered Bonds

UniCredit Bank Austria (Baca) was set to issue its fastest growing, most subscribed covered bond ever on Tuesday and Sparebank 1 Boligkreditt was posed to bring ts most subscribed deal with its most granular order book ever. Both covered bonds were priced flat or slightly inside fair value and illustrated that market conditions are at the best they've been this year.

There is still a fair chance of benchmark covered bond supply from central and eastern Europe this year, though it will be limited. Supply scarcity should support spreads alongside a fundamental improvement as all legal frameworks will be updated to bring them into line with the European Union’s covered bond directive.

Caffil returned to the covered bond market on Monday to issue its fourth trade this year. Despite being its biggest deal in well over two years, it was well subscribed and was priced slightly inside fair value, implying that stretched valuations still have scope to tighten. At the same time UniCredit Austria mandated leads for a 15 year deal.

Nationwide Building Society said this week that it was looking to reduce the size of 11 of its euro and sterling covered bonds through a tender offer, in an effort to optimise its funding and liquidity position.

GlobalCapital is proud to announce this year's winners of the covered bond awards

GlobalCapital caught up with Rabobank's head of long term funding, Ger Buls, and head of investor relations, Mirjam Bos, to ask about the impact of Covid-19 on the bank's balance sheet, the usefulness of crisis management tools and prospective funding needs.

Covered bonds risk becoming less relevant in future if central banks continue to eclipse private investors as the banking system’s principal funding source, Moody’s warned. Nonetheless, delegates from a record number of countries registered for Euromoney ECBC Virtual Covered Bond Conference, which began on Wednesday.

The European bond market has lost none of its charm or interest, said one of its most experienced bankers this week, on the verge of his retirement. Hugh Carter, Commerzbank’s head of credit syndicate, is leaving the bank on September 18.

UniCredit’s German subsidiary, HVB, unearthed demand of €2bn for its €1bn eight year Pfandbrief that priced on Tuesday. The deal will be followed by a non-deal roadshow for a second issuer from Japan.

DZ Hyp priced a well-subscribed €1bn five year Pfandbrief on Monday through fair value and with the largest negative yield of any covered bond issued this year. The syndication is strong encouragement for hesitant issuers considering deals in this tenor, where yields are at their most punitive.

DNB Boligkreditt did not waste any time waiting to tap its covered bond first issued last week, raising a further Skr500m on Thursday in order to capitalise on the attractiveness of the Swedish krona compared with other currencies.

Deals issued this week by BPCE and MünchenerHyp (MuHyp) met with “overwhelming demand” and suggest it is only a matter of time before a covered bond is priced inside of fair value.