Covered Bonds

The case for investing in Italy’s banks is unlikely to be radically altered by the outcome of the country’s general election on Sunday, March 4, according to some FIG bond buyers.

In what is likely to be seen as a warning shot to covered bond issuers, the European Central Bank has excluded the covered bonds issued by Anadi Bank for repo purposes.

Following an expansion in its mortgage lending business, German building society Bausparkasse Schwäbisch Hall (BSH) has announced plans to mimic Wüstenrot Bausparkasse and set up its own covered bond programme.

The long end has begun to rally in the rates market, and whilst this should boost longer dated covered bonds, traders are not convinced that there is scope for much flattening of the rates curve.

The outlook for Canadian covered bond supply in euros is not as grim as it seems, despite the fact that the nation’s lenders have already issued three quarters of what they supplied in euros In 2017, the cross currency basis swap is not particularly compelling and senior unsecured funding is cheap in dollars.

Syndicates have encountered some difficulty in placing financial institution bonds this week, but there is optimism in the face of widening spreads. This is just as well for HSBC’s plans to raise $5bn-$7bn of the most risky form of bank debt in the first half of the year.

De Volksbank has appointed joint leads for a roadshow with plans to issue a 10 year benchmark covered bond — a tenor that has tended to be a little unloved in the secondary market. ANZ New Zealand has also appointed leads for a roadshow.

Overseas Chinese Banking Corporation (OCBC) had adequate demand to print a €500m five year covered bond on Thursday, and though it was unable to reach the upper end of its size ambitions, it was able to issue the tightest Singaporean covered bond in euros.

United Overseas Bank issued its debut covered bond in sterling on Wednesday, and the first from a Singaporean bank. Despite being its maiden deal, UOB was able to match the spread of more established sterling issuers. At the same time, Overseas Chinese Banking Corporation (OCBC) has mandated for a euro covered bond benchmark.

Nordea and BPCE helped revive covered bond market confidence on Wednesday after some lacklustre deal receptions at the start of this week, with the successes due to thoughtful consideration of tenor and pricing strategies.

Financial institutions bond investors are looking for an ‘attractive entry point’ when HSBC opens books on $5bn-$7bn of additional tier one issuance in the next four months, following the bank's latest results on Tuesday.

BPCE chose to differentiate itself from other French issuers on Tuesday by mandating joint leads for the first French seven year of 2018.