Covered Bonds

The pace of issuance looks set to slow down over the next few weeks, but a few opportunistic transactions could emerge given strong market conditions, bankers said on Thursday.

Société Générale attracted strong demand for its inaugural green Obligations de Financement de l’Habitat on Monday. The green covered bond put the French issuer at the “forefront of positive transformation” and “sets a standard”, said a spokesperson.

Toronto-Dominion Bank (TD) returned to the covered bond market for the second time this week following its dollar benchmark and, thanks to a late rise in yields, the eight year deal offered more than twice the return of CIBC's eight year issued a week ago.

Berlin Hyp this week attracted strong and broad interest for a green mortgage Pfandbrief that, thanks to a small rise in yields since the deal was mandated, narrowly avoiding being priced with a negative return.

Activity in the green covered bond market is improving with Berlin Hyp (BHH) mandating leads for a green mortgage covered bond this week, just a few days after Société Générale issued its first green covered bond.

Toronto Dominion took advantage of strong demand on Monday to issue a $1.75bn three year covered bond, which was priced almost flat fair value.

DZ Hyp managed to build a substantial book in little time on Tuesday for its second 10 year Pfandbrief of the year, with demand fortunately swelled by an overnight rise in yields.

Toronto Dominion opened order books on Monday for the third dollar benchmark covered bond from a Canadian issuer this year and, like the others, it has also chosen to issue a three year.

Investors rushed to buy Credit Mutuel Arkea’s 10 year covered bond on Friday and lock in the positive yield before it disappears, probably in a matter of weeks. Strong demand was all the more remarkable given the bank’s Aa3 rating could be downgraded by three notches.

Covered bond yields plunged further on Thursday, and with the European Central Bank's covered bond purchase programme (CBPP3) expected to be reactivated, it seems likely that negative yielding covered bond issuance will soon extend to issues outside Germany.

Canadian Imperial Bank of Commerce (CIBC) issued its first euro covered bond in well over a year on Wednesday and was able to reap the benefit of its rare appearance by pricing a €1bn eight year flat to its curve.

Santander set a new milestone in the covered bond market on Wednesday with its €1.5bn 10 year, which was one of the most oversubscribed deals of this size and tenor in years.