Covered Bonds

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.

Santander UK, Sparebank 1 Boligkreditt (Spabol) and Erste Group were able to price flat or through their covered bond curves on Tuesday after stoking up hefty demand for their new issues.

Covered bond supply is possible next week with core issuance in the ultra-long end and UK supply in the intermediate to long-end looking promising — despite holidays in the UK and France.

Dismal European growth has weighed on rates, forcing buyers down the curve in search of yield and spread. A sharp turnaround feels distant, but a stabilisation has already materialised and investors that piled into long-dated bonds may come to regret it.

In a week shortened by a public holiday, the only borrower to put its head over the parapet in the Swiss franc bond market was Pfandbriefzentrale der Schweizerischen Kantonalbank, the issuance vehicle owned by Switzerland’s 24 Cantonal banks.

Euro investors have become more receptive to UK bank debt this year, leading to a blowout reception for a covered bond from Yorkshire Building Society this week. But issuers are yet to break a long period of silence in sales of unsecured products, mindful as they are of a Brexit hangover in the euro market.

The euro covered bond market is ‘wide open’ for any UK bank following a successful transaction this week from Yorkshire Building Society (YBS) and before that, Lloyds Bank. This supply could also provide a vital stepping stone to the first UK senior deal in euros this year, said bankers.

Santander attracted strong demand for a €1.5bn 12 year covered bond issued on Tuesday, helped by the rarity of Spanish covered bond supply and the relatively attractive return over mid-swaps.

This year’s covered bond market's performance could come back to bite it. Limited supply should support the market, but ultra-tight spreads and low yields have left investors vulnerable to a sell-off — not least because they have been forced to extend duration in search of a return.

The head of FIG origination and syndication at NordLB has resigned and is understood to be heading for Landesbank Hessen-Thüringen (Helaba), where he will have an expanded role.

De Volksbank has mandated joint leads for a non-deal roadshow to market its green bond framework. At the same time Berlin Hyp has boosted reporting standards on its green portfolio.