Covered Bonds

Raiffeisen-Landesbank Steiermark and Hypo Oberösterreich are the only two issuers visibly planning covered bond deals, but with three major Spanish banks emerging from blackout on Friday, there is hope for more Spanish supply. In the meantime, secondary market flow has become more balanced with demand noted particularly at the long end.

Canada’s office of the superintendent of financial institutions (OSFI) is expected to raise limits on covered bond issuance, paving the way for additional supply from established and new names.

Santander has hired a new covered bond trader who shares the same name as the trader it recently lost.

Skipton Building Society issued its inaugural covered bond on Wednesday at a good size and a fair spread. The sale follows a pattern of wholesale funding diversification for the borrower that began last year.

Caja Rural de Navarra (CRN) priced the first Spanish covered bond in almost three months flat to its curve and with the highest subscription ratio of any investment grade (IG) covered bond issued this year. The recently upgraded sustainable offering, which was rated six notches above the Kingdom of Spain, also offered a rare spread pick-up over the sovereign.

The moribund dollar covered bond market is set for a renaissance as the cost advantage compared with other currencies and other sources of wholesale funding has improved. Issuers ought to be renewing alternative sources of demand.

Swedbank announced in its results on Tuesday that a proposal to change the regulatory treatment of Swedish mortgages would lower its common equity tier one (CET1) ratio. The rule change will also take Swedish banks’ additional tier one (AT1) bonds closer to their trigger levels.

Caja Rural de Navarra (CRN) mandated leads on Tuesday for a €500m seven year sustainable covered bond which is likely be launched on Wednesday. At the same time, Landshypotek Bank AB mandated leads for a roadshow to present its green framework ahead of a five year Swedish krona covered bond benchmark.

Credit Mutuel CIC issued the widest 10 year French covered bond of this year on Monday, reflecting higher net supply in 2018 compared with previous years and less central bank buying activity. But with net supply set to fall, spreads should soon stabilise.

The European Central Bank’s Ad Visser acknowledged its "flexible" approach to covered bond purchases at the European Covered Bond Council’s plenary meeting held in Vancouver on Wednesday. His remark was made in response to a question about whether the ECB was reducing its primary market orders by 10% to a maximum of 30% of a deal’s size.

Investors were queuing up to place orders for new deals from Norway’s Sbanken Boligkreditt and Poland’s mBank Hipoteczny on Thursday, as the pair looked to enter the euro covered bond market for the first time.

Rabobank issued two tranches of covered debt on Wednesday and was able to match ABN Amro’s record for the tightest ever 20 year spread. DG Hyp also issued a covered bond, its first since March last year.