Covered Bonds

The pace of covered bond supply is expected to remain fast on Tuesday, with as many as three issuers mandating lead managers for benchmark deals.

Crédit Agricole SFH took advantage of curve steepness to issue a €1.25bn eight year which, unlike recent 10 year deals, managed to attract strong demand from bank investors buying for their liquidity portfolios.

Unione di Banche Italiane (UBI Banca) wasted little time in following Crédit Agricole Cariparma with the second Italian Obbligazioni Bancarie Garantite of the year. The relatively small sized €500m tranches were just oversubscribed, reflecting the fact they were priced deeply through multiyear treasury bonds (BTPs).

The covered bond market looked weak on Friday with dealers reporting heavy selling flows as clients switched into new, cheaper bonds and reduced exposure in new issues where they had been over-allocated.

A thinly oversubscribed €1bn 10 year covered bond issued this week by Compagnie de Financement Foncier could mark the beginning of the end of the bull run in covered bonds. Bill Thornhill reports.

The sterling covered bond market enjoyed a strong start to the year, with four issuers raising a collective £3.7bn. Barclays priced the first deal of the year, which also happened to be one of the longest and largest.

Crédit Agricole Cariparma took advantage of the exceptionally tight spread environment to issue the first 20 year Obbligazioni Bancarie Garantite (OBG) on Thursday and completed the final leg of its 2018 funding requirement at a record spread through BTPs.

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.