Covered Bonds

LBBW, Santander UK and Westpac all enjoyed fair demand for seven year covered bonds issued this week, suggesting good scope for further issuance in this tenor.

Westpac and Santander UK returned to the euro covered bond market on Thursday. Though early book momentum was marginally stronger in the Australian deal, the oversubscription ratios for both deals was rather low. Meanwhile, Stadshypotek showed that there is still good scope for further sterling covered bond supply.

Crédit Agricole Cariparma returned to the market on Thursday to complete the final leg of its 2018 funding requirement, taking advantage of the exceptionally tight spread environment while it still exists.

Bank of Nova Scotia and Lloyds Bank both offered covered bonds in the floating rate note format to sterling investors on Wednesday, while Stadshypotek announced a mandate for a similar deal.

Compagnie de Finacement Foncier (CFF) was unable to attract a swell of demand for its 10 year, possibly due to the tight starting spread. In contrast, yield hungry investors flocked to ABN Amro’s mega-sized 15 year offering.

Caixabank brought the first covered bond deal of the year from Europe’s periphery on Wednesday but its offering appeared to struggle for attention on a busy day in the covered bond market.

A plethora of covered bonds issued in the first week of 2018 met with strong investor demand reflecting the fact that buyers have considerable amounts of cash to put to work.

The European Central Bank’s decision to exclude conditional pass through (CPT) covered bonds issued by non-investment grade issuers from its covered bond purchase programme (CBPP3) will constrain liquidity and credit where they are most needed, and is not necessarily justified by risk considerations.

LBBW and Barclays attracted strong demand for the first euro and sterling covered bond benchmarks of 2018 while ABN, Compagnie de Finacement Foncier (CFF) and Bank of Nova Scotia mandated leads for deals that suggested there would be a typically frenetic start to the year.

Commerzbank is "working on" a replacement for two longstanding FIG syndicate bankers who left the firm just before Christmas.

Danish lenders including Nykredit are set to issue a larger volume of covered bonds than normal this December.

Dutch lenders may account for 35% of the overall Basel III capital shortfall for European banks, even though they make up less than 10% of the region's total exposures and own funds, according to analysts at Rabobank.