Covered Bonds

The European Banking Authority (EBA) has published a bold consultation paper setting out guidelines for loan origination and credit monitoring. Although the paper is likely to be welcomed, some areas will probably be burdensome for banks to comply with.

Axa SFH issued its debut covered bond on Thursday, attracting a comfortably oversubscribed order book for the positive yielding eight year, which was priced at close to fair value. At the same time, Nationwide Building Society took advantage of the Swiss National Bank’s more generous repo arrangements to issue a three-part covered bond denominated in Swiss francs.

Credit Suisse Switzerland issued its debut covered bond from its newly structured programme on Wednesday, achieving a very solid outcome in a short time frame. And the Swiss franc-denominated covered bond was quickly followed by another from the UK’s Nationwide Building Society.

Landesbank Hessen-Thüeringen Girozentrale (Helaba) sold the first negative yielding covered bond since 2017 on Wednesday, attracting good demand for the €750m five year Pfandbrief.

UniCredit AG issued its first dollar Pfandbrief on Tuesday, shortly after DekaBank had quickly wrapped up a sub-benchmark eight year. The two deals followed an inaugural sub-benchmark seven year from Slovakia’s Tatra banka that was priced on Monday.

UniCredit’s German subsidiary, HVB, has mandated leads for the first dollar covered bond in its 150 year history reflecting a preference to avoid issuing a negative yielding euro benchmark.

Credit Suisse has published a base prospectus for its newly set up covered bond programme, suggesting it may be ready to make a formal deal announcement in the next few days.

Mediobanca attracted strong demand on Monday for a long seven year Obbligazioni Bancarie Garantite (OBG), which offered an eye-catching yield despite pricing well through BTPs. The deal emerged as the short end of the covered bond curve plunged deeper into negative yielding territory.

AXA Banque has mandated lead managers for a roadshow starting on Thursday as it looks to sell its first covered bond in euros.

DCM bankers say that market conditions are just right for some of Europe’s smaller and more marginalised financial institutions to bring new bond deals ahead of the summer.

Participants in the covered bond market believe that it is only a matter of time before issuers set out to price new deals at negative yields, casting minds back to ground breaking transactions from Berlin Hyp in 2016 and 2017.

Four major announcements have been made today by the European Commission and its Technical Expert Group, which is drafting the substance of several parts of its multi-faceted Sustainable Finance Action Plan. There were new texts on the Taxonomy, Green Bond Standard and Low Carbon Benchmarks regulations as well as guidelines for companies on how to report climate change-related information. Many market participants welcomed them.