Covered Bonds

The primary market is likely to remain as active in October as it was in September, but in light of strong conditions and the European Central Bank meeting at the end of the month, volumes are ‘biased to the upside’, according to one banker.

National Bank of Greece (NBG) has appointed leads to market its first covered bond since the Greek sovereign crisis, a transaction which rival bankers believe is assured of success.

Investors piled into a 10 year covered bond from Société Générale this week, even though it was the fifth from a French issuer in the same tenor in the last month. But with issuers incentivised to pre-fund ahead of 2018, some market participants say that investor resistance will be seen before year-end.

The covered bond market has not looked this strong all year, and with the European Central Bank (ECB) widely expected to announce a tapering of asset purchases this month, borrowers are highly motivated to issue in size and duration — a message that BPCE understood loud and clear when it issued a long 10 year on Wednesday.

Nationale-Nederlanden Bank (NN Bank) issued its first covered bond flat to fair value, yet still managed to achieve a subscription ratio higher than any other Dutch covered bond in at least five years.

National Bank of Greece’s covered bond rating would be higher given the bank’s commitment to a 25% minimum overcollateralization ratio, but this is constrained by the sovereign and issuer rating.

National Bank of Greece (NBG) has appointed leads to market its first covered bond since the Greek sovereign crisis. Meanwhile, Nationale-Nederlanden (NN Bank) has signalled its intention to press ahead with its debut deal following its recent roadshow.

Covered bonds secured against assets that are not compliant with the capital requirements regulation’s (CRR) definition of covered bonds should not be eligible for liquidity coverage ratio (LCR), according to the European Banking Authority (EBA) — a view that is at odds with current market practice and the Commission’s Delegated Act.

EU officials from various institutions are pushing to complete the ‘third pillar’ of the Banking Union, despite strong opposition from a number of public and private stakeholders.

Finnish covered bond issuer SP Mortgage Bank has appointed leads for a roadshow that is scheduled to finish in mid-October. As only two Finnish covered bonds have been issued this year, a warm reception is assured for the rare offering.

Piraeus Bank will privately place a €500m five year covered bond to three supranational agencies in order to support €700m of new lending to small and medium sized companies across Greece.

This week’s slate of covered bonds saw record after record broken — a mania that was evident across the whole FIG sector. With European rates set to remain at their lows throughout next year and the macroeconomic backdrop continuing to improve, it is difficult to see what could spoil the party.