Covered Bonds

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.

Covered bond issuers were urged to do their toughest covered bond trades in the wake of an outstanding result on Thursday for Sumitomo Mitsui Banking Corporation, which attracted a deeper and broader range of higher quality demand for its first negative yielding structured covered bond than any of its previous deals.

Ex-Barclays banker joins Finsbury to develop equity advisory — Laubjerg hired for natural resources at HSBC — Rousseau leaves Deutsche and joins Citi

Sumitomo Mitsui Banking Corporation sent a positive signal to hesitant Asian covered bond issuers on Thursday when it was set to price its first negative yielding covered bond, attracting a deeper and broader scale of demand than on any of its previous deals.

The covered bond market appeared well supported this week with the success of new deals suggesting scope for spreads to tighten further, especially Asian bonds. However, the long end of the curve could prove vulnerable as SSA supply ramps up, especially from the EU, which will be funding its coronavirus rescue package in the bond market, according to a covered bond trader with a good share of the market.

BPCE’s seven year benchmark issued on Wednesday was subscribed more than six times and priced flat to the curve. The "overwhelming" demand caught leads off-guard and suggests eurozone issuers can now price deals with negative new issue premiums (NIPs) for deals with a restricted size.