Covered Bonds

Société Générale this week issued a highly oversubscribed €1bn eight year that paved the way for follow-on French covered bonds from Credit Mutuel CIC — which attracted a €5bn order book for its two part deal — and La Banque Postale.

Rabobank has issued the largest covered bond of the year, drawing the biggest and most granular order book for any covered bond in over five years in the process. The stellar reception illustrated the issuer’s broad reach and confirmed that the full gamut of covered bond buyers are now back.

Sentiment has changed in the covered bond market. After almost a year of spread widening, a new pricing equilibrium has been reached.

Four covered bond issuers returned to the market on Wednesday and, in contrast to the start of the year when concessions were 5bp-7bp, none paid more than 2bp.

SCBC chose to issue its first green covered bond in its home currency this week, saving itself a few basis points compared with euros — where a green covered bond is now considered 'feasible'.

Banca Monte Dei Paschi di Siena (MPS) achieved a strong result for its first Obbligazioni Bancarie Garantite (OBG) since 2015, sending a strong signal to investors, and particularly those of its struggling subordinated bonds.

Fearful of missing out and, in the absence of competing credit supply, investors piled into six covered bonds on Tuesday with a combined value of more than €6bn.Royal Bank of Canada’s deal epitomised the state of investor frenzy as it was able to issue the largest deal of the year with a negative new issue premium.

Banca Monte Dei Paschi di Siena (MPS), Fédération des caisses Desjardins du Québec (FCDQ), SpareBank 1 Boligkreditt (Spabol) and DZ Bank have announced plans to issue covered bond benchmarks on Wednesday when the market is expected to be just as busy as it was on Tuesday.

Credit Mutual-CIC Home Loan SFH has been quick to seize the opportunity identified following Société Générale's blow-out covered bond reception on Monday and has mandated leads for a follow-on dual tranche deal.

A €5bn wall of demand chased a trio covered bonds issued on Monday by Société Générale, PKO Bank Hipoteczny and Deutsche Pfandbriefbank and showed that, after a shaky start to 2019, the market has now found form.

Non-bank lender Kogta Financial and Northern Arc Capital have sold the first Indian dual recourse bond secured on auto loan receivables.

Although the public covered bond market was quiet over the second half of this week, several issuers have been busy working on private placements in the year so far. These deals have been driven by reverse enquiry from insurance firms looking for safe, ultra-long dated investments that meet return targets.