Covered Bonds

Eika Boligkreditt and Sparebanken Vest Boligkreditt issued covered bonds flat or inside their curves this week. But a deal for Sparebank 1 Boligkredit stood out for its green credentials that ensured it received more demand from more investors and achieved a much larger deal size.

Fédération des caisses Desjardins du Québec (CCDJ), Compagnie de Financement Foncier (CFF) and Sparebanken Vest Boligkreditt (Svegno) were set to issue covered bonds with zero new issue premiums on Thursday. But after a surprisingly busy week, the market is now "running out of steam" with order books were much slower to build and subscription ratios far lower than transactions issued earlier this week.

The burgeoning €30bn market for sustainable covered bond financing received another boost last week after the European Covered Bond Council formally adopted environmental, social and governance (ESG) transparency enhancements to its Harmonised Transparency Template (HTT) that go well beyond what issuers currently disclose and should improve investors’ ability to compare deals.

Fédération des Caisses Desjardins du Québec (CCDJ) mandated leads on Wednesday for a five year and Compagnie de Financement Foncier (CFF) mandated leads for a 10 year deal, to take advantage of exceptionally strong market conditions with both deals likely to be launched on Thursday.

A trio of covered bonds from NN Bank, Bawag and Eika Boligkreditt that were issued on Wednesday, were all exceptionally well subscribed, though the Norwegian deal stood out as it was priced considerably through fair value. The transactions suggest secondary spreads are less representative of fair value and send a strong signal to non-Eurozone issuers with illiquid curves.

Surging covered bond issuance that is printed only for repo at the central bank and official sector purchases means that the asset class is now less relevant for market funding purposes than ever before. If this continues, the systemic importance of the €2.7tr global market will be undermined just as efforts to develop it look to bear fruit.

Bawag, NN Bank and Eika Boligkreditt took advantage of exceptionally strong market conditions to mandate leads for covered bonds that are expected to be priced imminently.

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