Covered Bonds

Issuers are flocking to the sterling bond market ahead of the crunch vote in the UK Parliament on prime minister Theresa May’s Brexit deal, which is scheduled for January 14. Issuers are taking full advantage of a parliamentary recess and a break in the political mayhem that saw the vote, originally due to take place last month, postponed due to May's fears it would be voted down. Burhan Khadbai and Tyler Davies report.

The covered bond market is likely to remain equally busy on Friday as it was on Thursday with a further three deals mandated. Bankers say next week could become even more frenetic.

Nationwide raised £1bn of five year covered bond funding on Thursday with its first Sonia-linked trade. It was perfectly timed to take advantage of the UK parliament’s recess and the brief period of political calm that this offered.

ABN Amro and LBBW issued perfectly respectable, though uninspiring, euro covered bond trades on Thursday, deals that stood in contrast to a heroic deal from Bank of Montreal (BMO).

LBBW decided against competing for investors' attention with Commerzbank on Wednesday and has opted to give investors time before opening order books for its first covered bond of the year on Thursday.

Commerzbank reopened the covered bond market with the first covered bond of the year and the first in more than a month. The generously priced two part transaction was slow to start, but in the context of a weak and volatile market backdrop, the size was impressive.

Commerzbank and LBBW are looking to become one of the first issuers in the euro market in 2019, having both announced new mandates for covered bonds on Friday.

The Covered Bond Directive is reaching a critical stage that will determine the market’s form and shape for years to come. Luca Bertalot, general secretary of the European Mortgage Federation and European Covered Bond Council, discusses this — and other key factors that will drive the market in 2019.

Financial institutions have sold more secured bonds in place of unsecured debt in 2018, according to the European Banking Authority. But the watchdog expects that the sector will confront an 'important challenge' next year, when some banks will face pressure to sell riskier securities to meet new loss-absorbing debt requirements.

Financial markets are often seen as cold, calculating machines for making money. That is part of their function. But increasingly, people are talking of markets’ broader social purpose — that they exist to serve humanity and make its existence healthier and more sustainable. Toby Fildes argues that, 10 years on from the crisis, this new ethos will govern the markets’ future.

The European Central Bank (ECB) took the market by complete surprise this week when it said that it would stop buying conditional pass-through (CPT) covered bonds as part of its asset purchase programme.

Portuguese banks will be able to use more of their loans to back covered bonds as house prices rise and domestic mortgages become safer products, Moody’s said this week.