Covered Bonds

Specialist French lender My Money Bank SCF (MMB) returned to the covered bond market on Monday to issue its second deal, which attracted a more diverse and larger order book than its first. A positive yield helped, but so did the issuer’s investor relations effort, according to a lead manager.

HSBC Canada this week issued a larger covered bond and with a higher subscription ratio than it managed on its inaugural deal, reflecting that its marketing efforts had “really resonated with investors”, according to the bank’s head of balance sheet management, Marty Halpin.

DekaBank managed to raise 10 year Pfrandbrief funding on Thursday, but with rates volatility spiking higher, the deal lacked lustre, similar to many covered bonds issued lately.

Erste Group and Crédit Agricole competed for covered bond investors’ attention at the long end of the curve on Wednesday with a rise in yields helping boost demand, particularly for the Austrian deal which started with a generous spread. At the same time Deutsche Hypo issued a three year.

Financial institution investors, desperate for any sort of yield pick-up are keeping their cash away from secondaries in the hope of earning new issue concessions in a rejuvenated primary market.

Deutsche Hypo, Erste Group and Credit Agricole SCF have mandated leads for covered bonds that are all expected to carry negative yields.

A transparent pricing approach was integral to the success on Tuesday of UniCredit AG’s (HVB) five year Pfandbrief, which was launched with a deeply negative yield.

BMO Capital Markets’ SSA banker Lindsay Wortzman is transferring to Toronto, and to replace her the London team have picked up Samantha Cook from Nomura.

Compagnie de Financement Foncier (CFF) unearthed strong demand for the first negative yielding non-German covered bond of the year, and the first with a long tenor.

The financial institutions bond market reopened following the summer break this week, with many issuers rushing to frontload supply before the European Central Bank’s meeting in September. But the market quickly ran into resistance from investors, as they pushed back against the glut of deals.

Global issuance of covered bonds returned to growth in 2018 according to the latest figures from the European Covered Bond Council (ECBC) published on Thursday, but the market faces a big challenge in keeping pace this year as negative rates play havoc with funding decisions.

Investors in unsecured bank debt instruments are unlikely to put up much of a fight against the inevitable march into negative yielding new issuance.