Covered Bonds

DNB Boligkreditt differentiated itself in a crowded covered bond market on Tuesday by issuing the first five year deal of 2018, a strategy that paid off, given it was also the largest deal of the year.

NIBC and Raiffeisenlandesbank NiederÖsterreich-Wien (RLB NW) found solid demand for their pair of €500m 10 year covered bonds issued on Tuesday. But with the tighter Austrian deal extracting more demand at a tighter spread, investors clearly showed a preference for the hard bullet maturity.

Banca Popolare di Milano (BPM) successfully issued its first covered bond transaction since June 2016 with the high spread overcoming credit quality and volatility concerns.

BayernLB has issued the first of three 10 year covered bonds to be priced this week. With the European Central Bank stepping up its presence in the primary market compared to January 2017, forthcoming deals from NIBC and Raiffeisenlandesbank NiederÖsterreich-Wien (RLB NW) are assured of a smooth execution.

Price sensitivity is becoming a material theme in covered bond deals issued this week, and the first Canadian covered bond of 2018, issued by Bank of Nova Scotia on Friday, was no exception.

Sparebank 1 Boligkreditt has mandated lead managers for a roadshow to market it first green covered bond. The news comes amid German press articles suggesting lawmakers in Luxembourg are set to propose a green covered bond framework. BayernLB is also lining up a vanilla 10 year Pfandbrief for execution on Monday.

DZ Bank has overhauled its debt capital markets operation and plans to use its sustainable finance credentials to push for more international business, especially in SSAs and covered bonds.

Crédit Agricole SFH and Caffil issued eight year covered bonds this week and managed to attract strong demand from bank investors buying for their liquidity portfolios.

A trio of 10 year covered bond deals issued this week showed that interest in this tenor is less uncertain than initially feared. But, in a rising yield environment, investors are likely to become more defensive and this demand risks being short-lived.

Westpac attracted substantial demand for its five year sterling floating rate deal on Thursday, with considerable investor liquidity ensuring a particularly attractive cost of funding.

NordLB issued its largest Pfandbrief since 2011 on Thursday, but the oversubscription ratio was on the low side — despite a relatively attractive new issue concession and a large order from the European Central Bank.

NordLB has mandated joint leads for a 10 year Pfandbrief which some bankers believe will prove an ‘interesting’ trade, reflecting the view that spreads are tight to competing agency paper.