Covered Bonds

ABN Amro is set to return to the covered bond market with its second deal of the year and its longest so far. At the same time The Mortgage Society of Finland plans a roadshow.

Caisse Française de Financement Local (Caffil) plans to issue its first social covered bond this year and, along with La Banque Postable (LBP), it is considering a debut green deal in 2019. Deutsche Pfandbriefbank (PBB) has green assets to fund but is biding its time. These issuers and other key market participants spoke of their sustainable finance plans in the Crédit Agricole CIB covered bond roundtable.

Turkiye Is Bankasi (Isbank) recently signaled its intention to issue, while HSBC Canada has registered a covered bond corporate entity.

Buyers, sellers and arrangers gathered together in March, in the wake of the European Commission proposing its Covered Bond Directive, for the GlobalCapital/Crédit Agricole CIB covered bond roundtable to debate how the market would fare as the European Central Bank withdraws its quantitative easing programme.

Valiant Bank returned to the market last week to issue its second covered bond transaction which, like its first deal, was denominated in Swiss francs. Being double the size of the first deal, it showed potential demand for more.

Covered bond investors would be better off ensuring a full recovery and maturity extension than accepting a partial recovery and claiming the remainder from the insolvency estate of the issuer, according to delegates who voted at the IMN conference in London on Tuesday.

The European Central Bank’s (ECB) recent decision to cut primary market orders for the covered bond purchase programme (CBPP3) is part of a long term tapering strategy that it is set to continue, delegates at the IMN covered bond conference in London heard on Tuesday.

Primary activity is likely to improve after the Easter break but bankers are telling issuers that covered bond new issue premiums are ‘a small price to pay’ in the context of much larger senior unsecured new issue concessions.

Covered bond specialists are eager to find out whether the European Central Bank’s lower than expected participation in recent covered bond issues is part of a long term plan or is merely a short term reaction to other events.

Funding officials said green bonds had stimulated other sustainability work across their organisations at the Climate Bonds Initiative conference in London on Tuesday.

Bank of Nova Scotia (BNS) was this week obliged to pay a generous new issue premium for its second euro benchmark of the year, reflecting weaker credit conditions, investor indigestion and its desire to issue in large size.

Investors are receiving a decent concession to buy new paper in the FIG market, and this has encouraged them to jump out of outstanding bonds, thus widening the curve further for new issuers. And covered bonds buyers are also gaining the upper hand, as the European Central bank pulls out.