Covered Bonds

HSBC Canada opened books on Tuesday for its first covered bond and followed in the same three year maturity, and with the same starting spread, as DBS Bank's issue on Monday. But, after several hours, when the spread was fixed at the initial level, lead managers failed to update investors on the order book size, leading some to question how well the deal was going.

DBS Bank attracted a strong order book for its $1.25bn three year covered bond, the largest ever issued by an Asian bank.

BPCE returned to the covered bond market on Monday to issue a €1bn eight year deal. Although the new issue premium was modest, the slightly tricky tenor may have deterred some investors and the subscription ratio was the lowest BPCE has experienced in four years.

A flurry of Asian bond issuers have ventured out in a bid to wrap up deals ahead of the Thanksgiving holiday in the US on Thursday, even as markets remain on shaky ground.

From June 2019 a large chunk of debt borrowed by banks from the EU periphery under the European Central Bank’s second Targeted Longer-Term Refinancing Operations (TLTRO II) will no longer be considered stable funding. Banks should refinance that debt in the market instead of hoping for another ECB handout.

The revolt by UK politicians against the draft Brexit agreement reached by prime minister Theresa May forced TSB Bank to pull its covered bond on Thursday, with investors also selling out of positions in other UK banks. The market fallout adds a thorn to the side of other institutions from the country planning to raise financing over the coming weeks, but it may not be enough to completely shut down markets, write Bill Thornhill, Jasper Cox, Tyler Davies, Sam Kerr and Nigel Owen.

Liberbank plans to issue its first covered bond, a transaction that will help refinance maturing debt borrowed under the European Central Bank's second Targeted Longer-Term Refinancing Operations (TLTRO). Many other banks face a similar problem, but seem to be ignoring the €399bn maturity wall that is fast approaching, writes Bill Thornhill.

A five year covered bond issued by Danske Bank’s Finnish subsidiary on Thursday was the most oversubscribed triple A rated covered bond issued since late August and suggested that recent negative headline risk had barely affected sentiment in euros.

Despite offering an attractive premium, TSB Bank was unable to garner enough interest for its five year sterling covered bond on Thursday, forcing it to postpone the deal. The decision followed a high level UK government resignation that caused considerable market volatility in the UK banking sector.

Liberbank plans to issue its first covered bond, Danske Bank in Finland is set to issue its first deal in three years and UniCredit Austria has announced a roadshow hot on the heels of a Pfandbrief issued by the German subsidiary.

HSBC Canada has mandated joint leads for its first covered bond and held investor meetings on Tuesday. The moves comes after a succession of successful dollar benchmarks from European and Canadian borrowers.

A Deutsche Pfandbriefbank three year Reg S dollar benchmark may have been meagrely oversubscribed on Tuesday but, at $600m, it was just large enough to make it over the size threshold required to meet the top liquidity coverage ratio category — to the benefit of certain investors.