Covered Bonds

Toronto Dominion took advantage of strong demand on Monday to issue a $1.75bn three year covered bond, which was priced almost flat fair value.

DZ Hyp managed to build a substantial book in little time on Tuesday for its second 10 year Pfandbrief of the year, with demand fortunately swelled by an overnight rise in yields.

Toronto Dominion opened order books on Monday for the third dollar benchmark covered bond from a Canadian issuer this year and, like the others, it has also chosen to issue a three year.

Investors rushed to buy Credit Mutuel Arkea’s 10 year covered bond on Friday and lock in the positive yield before it disappears, probably in a matter of weeks. Strong demand was all the more remarkable given the bank’s Aa3 rating could be downgraded by three notches.

Covered bond yields plunged further on Thursday, and with the European Central Bank's covered bond purchase programme (CBPP3) expected to be reactivated, it seems likely that negative yielding covered bond issuance will soon extend to issues outside Germany.

Canadian Imperial Bank of Commerce (CIBC) issued its first euro covered bond in well over a year on Wednesday and was able to reap the benefit of its rare appearance by pricing a €1bn eight year flat to its curve.

Santander set a new milestone in the covered bond market on Wednesday with its €1.5bn 10 year, which was one of the most oversubscribed deals of this size and tenor in years.

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Canadian Imperial Bank of Commerce (CIBC) has mandated leads for its first euro covered bond since January 2018.

Covered bond spreads are so tight and yield so low, that a correction is probably overdue. But strong technical factors will continue to support the market — at least until September.

Société Générale is expected to issue its first ever deal from its positive impact covered bond framework, after meeting with investors in the euro market this week.

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