Covered Bonds

Covered bond investors have had a stellar year but are unlikely to match that performance in 2020. They will be relying upon healthy new issue premiums and a steady supply of higher yielding, non-standard deals to stand a chance of making good returns.

The European Central Bank has been increasing its proportion of covered bonds relative to other assets bought through its asset purchase programme (APP). Bank research analysts expect that the ECB’s presence will be even more keenly felt in 2020, with covered bond redemption volumes set for a steep increase and with the central bank free to buy at levels below the discount rate.

Raiffeisen Bank International (RBI) managed to attract a convincing order book for its debut covered bond issued on Monday following a roadshow, largely thanks to the rare double-digit spread it paid over mid-swaps, and the compelling pickup compared to its Austrian peers.

Pfandbriefzentrale issued its largest ever bond this week, a Sfr1.386bn ($1.398bn) triple-tranche deal that included a Sfr980m 12 year tranche that was itself the largest single issue in the Swiss franc bond market this year.

Covered bond spreads were holding steady on Thursday as bank traders lighten their balance sheets amid modest secondary market buying from the European Central Bank (ECB), ahead of Crédit Agricole and Nordea’s inaugural green transactions and Raiffeisen Bank International’s vanilla debut.

Caisse de Refinancement de l’Habitat (CRH) returned to the covered bond market on Wednesday to issue a €1bn seven year covered bond, but attracted €1.4bn less demand than for its €1bn 10 year, issued in October.

A FIG syndicate manager has left UBS in London as part of a much wider reorganisation. This has boosted syndicate staffing levels in Frankfurt, among a number of sweeping changes.

The Fédération des Caisses Desjardins du Québec (FDCQ) issued its longest covered bond at its tightest-ever spread to Canadian peers on Tuesday.

The Fédération des caisses Desjardins du Québec (FCDQ) on Monday mandated leads for a euro covered bond, its second appearance in euros since January and its third overall in covered bonds.

Crédit Agricole has mandated its investment banking team to present its updated green bond framework, which will be used for its debut green covered bond, to investors.

DZ Bank has appointed a new head of covered bonds in a move that acknowledges the bank’s growing league table presence in the euro covered bond market, particularly in Canada and Slovakia.

Strong interest from investors outside the UK on Thursday ensured that Yorkshire Building Society (YBS) was able to attract the highest demand for any sterling covered bond it has ever issued. Moreover, the sizeable deal was priced with no new issue concession and several basis points cheaper than if it the funding was in euros.