Covered Bonds

The proportion of green covered bonds in the market could rise substantially as regulators push for greener finance and banks focus increasingly on financing of green assets, according to a report published this week by Standard & Poor’s.

Deutsche Apotheker-und Aerztebank (ApoBank) issued a comfortably oversubscribed 10 year Pfandbrief which was priced at the widest level of any German 10 year issued so far this year.

Covered bond issuers are monitoring the dollar market with recent deals from DNB Boligkreditt and CIBC suggesting a welcome reception for further issuance. However, Canadian banks, perhaps the most likely dollar issuers, could well be enticed to consider their home market following TD’s recent success.

After a series of 10 year Pfandbrief flops, Deutsche Apotheker-und Aerztebank (ApoBank) has decided to test appetite for another German 10 year with, unusually, its second deal of the year.

Three banks showed they were thirsty for topping up on their existing stock of covered bonds on Tuesday, with Bank of New Zealand favouring the format over senior unsecured and Commerzbank tapping one of the four deals it has sold already this year.

Bank of New Zealand has chosen a covered bond as the format for a new deal, after originally announcing it would consider senior unsecured or covereds.

Commerzbank and Oma Savings Bank both said on Monday that they were looking to tap existing covered bonds, as issuers tiptoed into the new week monitoring primary market conditions closely.

The European Banking Authority has spelled out its thoughts about the worth of creating a market for European Structured Notes (ESNs), a covered bond-like dual-recourse instrument backed by a broader range of assets than legislative covered bonds ahead of a public hearing on the potential asset class next week.

Canadian Imperial bank of Commerce this week issued the first dollar covered bond in 144A format this year. The funding, which was much cheaper than the cost of raising a similar deal in dollar senior format, could well unleash a slew of supply, mostly from Canadian banks but also potentially from European names.

After an absence of more than two years, Royal Bank of Canada this week issued its first covered bond in euros, attracting a comfortably oversubscribed order book for a €1.5bn deal which was priced with a skinny new issue concession.

Deutsche Hypo this week priced an eight year Pfandbrief at the widest level of any benchmark sized German covered bond this year, suggesting investor sensitivity is particularly pronounced in this part of the curve when the spread to mid-swaps is negative.

The European Covered Bond Council (ECBC) has appointed Boudewijn Dierick as deputy chairman where he will help advise on a number of key developments, including the impending implementation of the European Commission’s covered bond directive and the formulation of a legal framework for European Secured Notes which will begin to take form on Tuesday, June 26.