Covered Bonds

Deutsche Bank was easily able to issue a €1bn five year Cédulas on Tuesday, alongside NIBC Bank which sold a €500m 10 year CPT deal, with both offering generous new issue concessions. On the same day, Aareal Bank and Commerzbank issued tightly priced Pfandbriefe.

Lloyds Bank is set to bring the first ever FIG benchmark linked to Sonia on Tuesday, alongside three issuers bringing euro benchmarks and one selling a tap.

Covered bond deals sold on Monday by Compagnie de Financement Foncier (CFF), United Overseas Bank (UOB) Singapore and Deutsche Hypo were all well received and suggested that the European Central Bank’s (ECB) planned end of the covered bond purchase programme is not a cause for concern.

Deutsche Hypo has mandated joint leads for a green Pfandbrief to be issued off its mortgage Pfandbrief programme.

The covered bond market has a reputation for allowing tough trades to be done, so when My Money Bank postponed its debut deal, the product was imprudently tarnished. The situation could have been avoided had the deal been launched a week earlier or sometime later — just not last week.

In response to the European Commission’s draft covered bond directive, the European Central Bank has set out a number of recommendations that should boost the appeal of covered bonds for investors, though not necessarily with issuers.

Royal Bank of Canada boosted sentiment in the covered bond market on Thursday with a tightly priced €1.5bn seven year. At the same time Société Générale issued a defensively priced and well subscribed €750m five year.

After a plethora of small deals, the covered bond market look set for a proper test of appetite as Royal Bank of Canada prepares to issue a seven year euro denominated covered bond.

Demand for a new Credit Agricole €500m public sector seven year covered bond this week was weak, but bankers are confident that sentiment is set to remain broadly constructive.

Environmental, social and governance investors have done a fine job of making their approach accepted and now mainstream in a money-driven industry. Along the way, they started saying it was all pragmatic, not about principles. That was a fiction, and under the pressure of climate change, it is being replaced with a more rounded philosophy. Jon Hay reports.

Markets are not prepared for climate change, which is expected to have severe economic consequences. Event risk, leading to credit risk and political action, will spur dramatic change, that could create a new low carbon economy. Climate change mitigation will eventually come to bear on all aspects of society, in the form of regulatory and fiscal incentives and disincentives. Having a green and sustainable action plan is therefore likely to become core to the strategy of every financial institution.

DZ Hyp has mandated leads for a non-deal roadshow, RLB Vorarlberg has mandated leads to roadshow its first covered bond, and ASB Finance has also appointed leads for a series of investor meetings.