Covered Bonds

The frenetic pace of buying seen in covered bonds issued earlier this month may have ebbed as rates market volatility has increased, but Thursday’s dual tranche offering from ING DiBA showed that demand is still vigorous.

The European Central Bank (ECB) is making it more difficult for banks to enter into covered bond repurchase agreement (repo) trades with it. That, along with a recent widening in the spread between senior unsecured bonds pay over banks' secured debt, such as covered bonds, could boost the supply of the latter to public markets.

Bank of New Zealand (BNZ) has mandated leads for a roadshow ahead of a possible euro senior unsecured or covered bond benchmark.

Covered bonds issued on Tuesday by UniCredit Bank AG and Hypo Vorarlberg Bank (HVB) found good demand, mainly from bank investors. Despite their meagre and diminishing returns, the bonds offered a better spread compared to other regulated assets.

Alpha Bank’s subsidiary in Romania has issued its inaugural covered bond (CB) — the first from the country. The ground-breaking deal represents an important milestone in the development of the Romanian capital market and helps diversify the bank’s funding.

UniCredit Bank AG (HVB) and Hypo Vorarlberg Bank AG are expected to open books on Tuesday for Pfandbriefe in the 15 and eight year tenors. The longer deal follows a series of other long-end trades and may be followed by more, as borrowers take advantage of remarkably strong market conditions to do their most difficult deals.

Bank of Queensland has mandated leads for a roadshow for a potential second euro conditional pass through (CPT) covered bond, and Bank of New Zealand has mandated leads for a roadshow with plans to issue a covered bond or a senior unsecured deal.

As UK loan, bond and derivative market participants work to the deadline of December 31, 2021 to stop using Libor, one of the biggest hurdles is how to calculate the new reference rate: Sonia.

Barclays and Lloyds Banking Group kept the sterling covered bond market busy this week with Sonia-linked trades that drew strong demand and were priced with no new issue premium.

Lloyds Bank found good demand for its third visit to the sterling covered bond market in the last eight months and the largest Sonia linked bond of that type issued this year. Attractive relative value and a prospective supply slowdown propelled demand, enabling the deal to be priced flat to fair value.

Barclays Bank kept the primary covered bond market alive on Wednesday, launching its first deal of the year and its first Sonia-linked transaction — though at £500m it was the bank’s smallest covered bond yet.

Abanca Corporación Bancaria will add its name to the growing list of debut covered bond issuers after mandating leads on Tuesday for a roadshow.