Covered Bonds

UK Sonia-linked covered bonds were trading stably on Tuesday, in contrast to euro denominated UK covered bonds which have been marked wider amid rising expectations the UK will crash out of the European Union. But, with macro-economic risks abounding, the global picture is disturbing bankers.

Participants in the financial institutions bond market had expected that issuers could hit screens with new transactions as early as this week, but so far macroeconomic and political uncertainty has discouraged them from putting investor appetite to the test this summer.

A ratings boost for Portugal could alert the country's covered bond issuers to the chance to print more, with the asset class at historically tight spreads.

Münchener Hypothekenbank (MunHyp) is introducing commercial paper to its existing Ecological ESG Pfandbrief programme.

Covered bond supply is expected to improve from the final week of August, and with more than 90% of the market now trading with a negative yield, a sustained wave of negative yielding issuance is now unavoidable.

A senior bank investor buying for his firm’s liquidity coverage ratio (LCR) portfolio told GlobalCapital on Thursday that he does not fear negative yielding covered bonds. What he fears is a glut of long dated issuance that he cannot buy. But issuers remain unwilling to bring serious size with a negative yield.

Yields have fallen so steeply and spreads have tightened so much in the covered bond market that the distribution of risk has become even more ‘asymmetric’ said a major asset manager, who feared bank treasury accounts would become less inclined to buy now that 10 year covered bond yields are negative.

Korea’s Financial Conduct Authority has supported the covered bond market this year with a series of new measures that aim to stimulate demand and supply. Its actions should promote local currency issuance, building on this year’s strong start.

There are only eleven votes between the top three contenders for GlobalCapital’s 2019 Covered Bond Issuer of the Year award: Lloyds, Toronto Dominion and Royal Bank of Canada. These banks have issued a number notable covered bonds in euros, dollars and sterling, which are summarised in the following article.

The survey for GlobalCapital's Covered Bond Awards 2019 is due to close on January 16. You don't need to be a subscriber to vote.

A wide divergence of opinion has emerged among covered bond analysts over the future of covered bond spreads. Some believe a 20bp tightening is due while others suspect they will widen.

Ahead of the 2019 Covered Bond Awards, GlobalCapital used Covered BondMarker and Dealogic data to assess which banks have performed best in the market over the last year. BNP Paribas was found to have worked on some of the most impressive covered bonds, HSBC helped arrange the largest volume of sales, while LBBW has taken the biggest share of the euro market.