Covered Bonds

Based on an analysis of 470,000 real estate valuations and 72,980 Italian mortgages, the European Covered Bond Council has published a report showing that energy-efficient mortgages present less credit risk than normal mortgages.

A former sovereign, supranational and agency bond trader at Commerzbank has joined NordLB after an almost two year hiatus from the capital markets.

MünchenerHyp (MuHyp) attracted swift and strong demand for its 15 year Pfandbrief on Tuesday, reflecting the rarity of its appearances in the primary market and the scarcity of 15 year Pfandbrief supply this year.

Standard and Poor’s is due to review the ratings of several German Laender over the next few weeks, and downgrades could undermine Pfandbrief valuations. But some market participants believe that scarcity of issuance in the asset class could in fact make spreads tighten further.

DNB issued a Swedish krona covered bond on Thursday in a size large enough to qualify for the best treatment under the liquidity coverage ratio (LCR) and at a more competitive funding level than was available elsewhere. The deal was issued amid renewed hope that Nordic issuers will stay active in euro covered bonds this year.

DNB successfully issued a Swedish krona covered bond on Thursday in a size large enough to qualify for the best treatment under the liquidity coverage ratio (LCR) and at a more competitive funding level than was available elsewhere. The deal emerges in the wake of a report from Moody’s which highlighted the strength of the Swedish covered bond market.

Scope for Nordic covered bond issuance in euros is moderately positive, even in Sweden where some issuers could yet make a strategic return to euros despite the higher cost. Danes and Norwegians may also make an appearance in euros, but Finnish supply hopes are considered more limited.

Erste Group has changed the reporting on its cover pool in a move that has effectively resulted in a substantial increase in issuance capacity which other borrowers with limited collateral could mimic.

Core covered bond markets still have scope to perform by a few basis points over the rest of this year, said bankers on Tuesday. They argued concerns about the EU recovery fund pushing spreads wider had been overplayed.

Doubts about the strength of covered bond investor demand were swept away on Tuesday after Berlin Hyp issued its most oversubscribed Pfandbrief in more than five years. The deal sends a strong signal to other issuers that may have been considering tapping the long end at negative yields.

Berlin Hyp has mandated leads for the first covered bond from the eurozone since June 30 and plans to issue a 10 year deal secured on green mortgages and has pledged to undertake a number of new strategic commitments.

Danish bankers believe that Danish mortgage banks are well capitalised and do not see the need to hold more capital, as was recently proposed by the Danish central bank.