Covered Bonds

The Spanish non-bank mortgage lender Unión de Créditos Inmobiliarios (UCI) is set to issue an unusual structured covered bond through a special purpose vehicle. The transaction works a little like legacy multi-Cédulas deals, benefiting from a liquidity facility that allows for a soft bullet extension.

Populism and economic change are melting down old idols. When the next crisis comes, new fiscal and monetary tools will be used — including helicopter money.

FIG bankers believe that issuers will refrain from rushing into the primary market following the summer break, waiting instead to hear what the European Central Bank has to say in September.

Banks in Japan might not be able to copy the structure of SMBC’s debut covered bond, resulting in a lack of uniformity in the market that may cause concern among investors. This stands in contrast to Korea, where banks are now exploring issuing in Korean won as there is a law in place that supports these instruments.

Nationwide Building Society took the opportunity to issue a £1bn three year Sonia-linked covered bond on Friday, pricing the deal flat to fair value. With Brexit negotiations expected to raise execution risk and volatility, another UK issuer could jump in with a follow-on deal early next week.

Canadian Imperial Bank of Commerce reopened the Australian dollar covered bond market on Thursday with one of the largest deals from an overseas issuer at a cost that matched that of its dollar funding.

The European Central Bank is not expected to provide too much detail on its forthcoming asset purchase programme on Thursday and will probably wait until September, bankers believe. Covered bonds have room to perform but, given negative yields and uncertainty over the scale and composition of purchases, not by much.

Investors jumped at the chance to buy Canadian Imperial Bank of Commerce’s Australian dollar covered bond on Wednesday.

The Covered Bond Awards 2019 survey is off to a very strong start with roughly 300 completed responses registered in the first week. Two banks are running neck and neck for the top award, but with four weeks to go, pecking orders can change.

A cavalcade of “familiar names” have come to the market over the last week. SSAs, corporates and FIG issuers printed across the euro curve, while a trio of supranationals were also active in emerging market currencies.

With yields at all-time lows and spreads continuing to fall, it is difficult to find value in covered bonds. But with supply drying up and further stimulus from the European Central Bank on the way, there are some overlooked parts of the market which ought to perform, traders say.

Standard and Poor’s has upgraded its ratings for covered bonds issued by Kutxabank, as the Spanish lender looks ahead to a series of redemptions over the course of the next year.