Covered Bonds

Wüstenrot Bausparkasse became the first German building society to issue a Pfandbrief on Wednesday. The deal attracted strong demand, enabling the issuer to increase the size.

Eika Boligkreditt closed the pricing gap to Norway’s national champion, DNB Boligkreditt, with a €500m seven year covered bond issued on Tuesday. At the same time Finland’s Oma Savings Bank mandated leads to market its inaugural deal.

Berlin Hyp (BHH) enjoyed tremendous demand for the first negative yielding covered bond in over a year, as international real money investors took advantage of the compelling relative value on offer to pile into deal and make it one of the most oversubscribed of the year.

Eika Boligkreditt has mandated leads for a €500m no-grow seven year, to be launched on Tuesday. The spread between Eika and DNB Boligkreditt is likely to have tightened substantially since the issuer last came to market in April 2016.

Berlin Hyp (BHH) has appointed leads for a four year Pfandbrief, and unless it plans on giving a away a large new issue premium, the bonds are expected to have a negative yield.

In contrast to most other research teams, which are predicting unchanged or higher covered bond primary volumes next year, analysts at Commerzbank expect gross supply to decline.

Mediobanca took advantage of robust market conditions, the limited funding window left this year and the growing possibility of peripheral rates volatility next year to issue a €750m 12 year covered bond at a considerably lower level than BTPs.

Several firsts were set in the covered bond market this week by issuers in Singapore, the Netherlands, Denmark and Germany. But at €1bn, OP Mortgage Bank’s long five year stood out for being not only the tightest Nordic deal ever issued in euros but also for being double the size of the others.

Achmea Bank has issued its first conditional pass through covered bond, pricing in exactly the same steps with the same final result as Aegon had earlier this week.

Deutsche Hypo issued its first green Pfandbrief flat to where it would have issued a vanilla deal, and though it was unable to tighten the spread from refined guidance, leads built the book in record time.

OP Mortgage Bank was set to price the first €1bn sized covered bond of the week on Wednesday and, despite offering hardly any new issue premium, the transaction found strong demand reflecting a popular but exceptionally rare tenor. At the same time, Switzerland's Valliant Bank issued its debut covered bond and Sparkasse Hannover issued a sub-benchmark Pfandbrief.

Some weaker days in the secondary market have focused minds on market conditions going into the final weeks of trading for the year. But investors are still lapping up covered bonds.