Covered Bonds

Yorkshire Building Society issued the most popular euro covered bond of any UK bank ever on Tuesday. Scant UK supply, a popular choice of tenor and a rare double digit premium over mid-swaps, amid negative yields, were key in driving demand.

Lloyds Bank’s €1.5bn five year has achieved the highest score of any covered bond issued this year in BondMarker and UBS has, on average, worked on the highest quality deals this year.

Yorkshire Building Society has mandated for a five year euro covered bond that will be the second euro benchmark covered bond from a UK bank this year. The deal emerges as investors chasing yield flatten the covered bond curve.

Société Générale may have provided market participants with a glimpse into the future after becoming the first bank to issue a covered bond as a security token on a public blockchain. Development of this technology is still at an early stage and is not without its risks, but proponents believe blockchain could revolutionise the covered bond market, reducing settlement times to just a few seconds.

Swedish krona levels look attractive compared to euros, say bankers, leading to a raft of large deals being printed at the short end. Swedbank and Deutsche Pfandbriefbank both benefited from these levels when they printed covered bonds this week.

Crédit Agricole has become the latest European bank to tap into strong demand for long-dated covered bonds in euros, raising €1.25bn of 15 year funding on Wednesday without paying a new issue premium to investors.

Svenska Handelsbanken was well received for a new senior unsecured transaction in the sterling market on Thursday, despite having pushed the spread towards a level that some investors might be able to pick up from a covered bond.

Valdis Dombrovskis, vice president of the European Commission, joined a chorus of voices at a European Covered Bond Council plenary meeting in Riga this week in praising efforts to create a harmonised covered bond framework for the Baltic states. But market participants said the project still had some way to go, with those involved working hard to flesh out the final details.

The Energy-Efficient Mortgage (EEM) initiative took another important step towards its objective of delivering a standardised European framework on Wednesday, with an event in Latvia bringing together various sponsors to discuss plans for the market’s development.

Société Générale has issued the first covered bond as a security token on a public blockchain last week.

Crédit Agricole became the latest European bank to tap into strong demand for long-dated covered bonds in euros, raising €1.25bn of 15 year funding on Wednesday without paying a new issue premium to investors.

A prominent member of the European Central Bank’s executive board has said that the institution will be keen on protecting ‘remarkable progress in lending to the real economy’ when it announces the terms of a new funding scheme for banks later this year.