Covered Bonds

Norway’s Ministry of Finance has said it will apply tighter mortgage lending standards from next week after temporarily loosening them to support the economy. The move, which was not unexpected in light of the resilient state of the economy and stubbornly high house price inflation, will minimise mortgage defaults.

Debut issuers Bausparkasse Schwäbisch Hall and Sumitomo Mitsui Trust Bank are marketing their inaugural covered bonds amid a pick-up in secondary market trading.

Luminor’s Estonian cover pool will have Latvian mortgages, Bawag’s Austrian cover pool will include Dutch mortgages. And once merger plans are fully completed, Caixabank’s cover pool will include those from Bankia, making it Spain's biggest, with a share of almost a third of the Spanish covered bond market.

If the European Central Bank (ECB) is serious about eventually scaling back its quantitative easing programme and encouraging a return to normal market funding, it will need all tools at its disposal. That suggests there is scope for an instrument that delivers a low cost of funding and supports the European economy. European Secured Notes (ESNs), which are likely to form part of the European Commission’s capital markets action plan, which is to be unveiled this Thursday, could provide the answer.

Green and sustainable finance is going through tumultuous change, as it crashes into the mainstream of capital markets, said speakers at the GlobalCapital Sustainable and Responsible Capital Markets Forum last week. They emphasised the importance of tying financing to credible transition plans.

Last week’s surge in covered bond issuance caused certain Norwegian deals to trade more softly by Monday. But traders viewed it as a buying opportunity, given robust technical backdrop.

Nationwide Building Society is buying back £2bn of covered bonds in euros and sterling. UK covered bond issuers are buying back securities as risks increase ahead of the end of the Brexit transition period.

GlobalCapital recently announced its annual Covered Bond Awards. Please take a look at our special supplement for full details, including a breakdown of the voting results, along with a focus on some of the winners.

The green bond market was conceived on a simple plan. A new class of green bonds would finance environmental projects, standing out from the grey mass of ordinary bonds.

Bank Austria UniCredit (Baca) and Bawag issued tightly priced and exceptionally well subscribed covered bonds this week, reflecting the scarcity of issuance from the region and in their chosen tenors.

Caffil took advantage of extraordinarily strong market conditions on Monday to issue a sizeable eight year covered bond slightly inside fair value and was followed on Thursday by Compagnie de Financement Foncier with the second largest covered bond of the week, and though it was also priced tightly, demand was far less compelling.

NN Bank extended along its soft bullet covered bond curve this week, following its strategy to fund in the ultra-long end. A tightly priced five year from Fédération des Caisses Desjardins du Québec (CCDJ) followed the deal later in the week.