Covered Bonds

Sparebanken Sør Boligkreditt has mandated joint leads for a new euro covered bond, the second five year transaction from a investment grade European issuer this year.

LBBW has promoted Thomas Meißner to be its new head of strategy. Alexandra Schadow takes over from Meißner as head of cross-asset research.

Even though the ECB's net asset purchases were halved to €30bn from January, the pace of covered bond buying did not change. Though the absence of a lengthy tapering period implies a greater cliff-edge effect when net purchases inevitably fall to zero, bankers were relatively sanguine on the spread outlook.

Fitch has warned in a report that there is no certainty that covered bonds will retain their large overcollateralization buffers (OC) during the course of their life, in the absence of a contractual commitment.

Investors showed their preference for additional tier one (AT1) deals with a short time until their first call dates this week, as they looked to reassess the sector’s value amid a bout of volatility.

Demand for a deal can be accurately reflected only in the context of a specific spread. Anything other than that can mislead investors, so the ECB should demand better.

NordLB attracted a strong order book and paid little new issue premium for its first dollar covered bond — also the first dollar covered bond of 2018 — a defensive three year dollar Reg S Lettres de Gage publiques.

Deutsche Apotheker- und Aerztebank issued a tightly priced €500m seven year mortgage Pfandbrief on Tuesday, paying a minimal new issue premium even though market conditions were awful.

Deutsche Apotheker-und Aerztebank (apoBank) has mandated joint leads for a seven year Pfandbrief. It follows one of the busiest starts to the covered bond market in years. With a more limited supply outlook spreads should stay stable for now. But with yields rising and relative value declining, core European borrowers will become ever more reliant on the Eurosystem to support their deals.

Landesbank Hessen-Thüringen Girozentrale (Helaba) and Sparkasse Pforzheim Calw issued tightly priced Pfandbriefe with quite limited demand on Thursday.

BPER Banca has become the first covered bond issuer to publish and upload loan data into the European Data Warehouse (ED). The move will boost investor appeal, help rating agencies meet European Central Bank requirements and could become important for programmes with extendable maturities.

Covered bonds issued this week undermine the assumption that peripheral markets are likely to be more vulnerable to a spread widening when the European Central Bank cuts net purchases to zero under the covered bond purchase programme (CBPP3).