Covered Bonds

Skipton Building Society took advantage of a strong credit market and brief hiatus in the quickly evolving and politically chaotic backdrop to Brexit to issue a £600m five year Sonia linked covered bond. The deal was more heavily subscribed and attracted a broader range of investors than any of its previous deals, yet was priced with little or no new issue premium.

Crédit Agricole Italia’s eight year covered bond has the highest BondMarker average score of any deal issued so far this month. The transaction is closely followed by deals from Banco BPI and BPER Banka. Intesa Sanpaolo is leading among the six Italian covered bonds issued this year, but the survey is still open and some marks could yet improve.

Skipton Building Society has mandated leads for its first Sonia-linked covered bond. The issuer follows National Westminster Bank and takes advantage of an improvement in sentiment that followed a UK Parliament vote last week.

Slovak Vseobecna uverova banka (VUB) attracted a €2.5bn orderbook from 160 mostly new investors on Tuesday for its first benchmark covered bond and the debut benchmark from Slovakia. The deal sends a strong signal to other borrowers across Central and Eastern Europe, where several banks are lining up with debut benchmarks of their own.

Lloyds Bank and National Westminster Bank issued exceptionally well subscribed covered bonds respectively in euros and sterling on Monday as Virgin Money announced roadshow plans for its debut deal. The three borrowers took advantage of the UK Parliamentary vote to avert a ‘no deal’ Brexit.

After completing a roadshow, Slovak Vseobecna uverova banka (VUB), a subsidiary of Intesa Sanpaolo, is set to issue its first euro-denominated covered bond in benchmark size.

Crédit Agricole Italia took 50% more covered bond funding than it had expected on Friday after being swamped with demand for a new eight year deal, while Banco BPI reopened the Portuguese covered bond market with a €500m transaction that received seven times as much interest from investors.

The Monetary Authority of Singapore (MAS) is considering making covered bonds eligible for repo, but Singapore dollar issuance would probably be needed, delegates at the Euromoney/ECBC Asian Covered Bond Forum heard this week. Domestic currency issuance would improve the resilience of Singapore’s banking system and potentially encourage other banks to set up programmes.

Banco BPI mandated lead managers for a five year Portuguese covered bond on Thursday — the first from the country since October 2017. The announcement suggests borrowers have a good reason to hit the market even though they will be able to fund more cheaply by tapping the European Central Bank.

UniCredit Bank Austria returned to the covered bond market for the second time this year on Wednesday extending its curve with a a new 10 year deal.

NIBC Bank paid a handful of basis points of new issue premium to launch a new conditional pass through covered bond on Tuesday, despite having taken a tougher route to the market by targeting a maturity at the longer end of the curve.

UK covered bonds have begun to perform in the secondary market, with investors spying opportunities to pick-up good relative value and sound fundamental protection. But UK issuers have been notable for their absence in euros this year due to continuing uncertainty around the outcome of Brexit.