Covered Bonds

Santander Consumer Bank managed to attract a comfortably oversubscribed order book for a tightly priced, sub-benchmark debut Pfandbrief on Tuesday.

The European Central Bank will stop buying conditional pass-through (CPT) covered bonds from sub-investment grade issuers from February 2018.

The European Commission needs to take a close look at which types of covered bond are eligible for the Liquidity Coverage Ratio (LCR) which, until the European Banking Authority’s (EBS) intervention, had been pretty obvious.

Deutsche Pfandbriefbank (PBB) issued an opportunistic £450m three year sterling covered bond on Tuesday. The funding proceeds provided a currency match for the bank’s sterling assets, with the cost being reasonably close to what it could have achieved in euros.

TSB Bank (TSB) has mandated leads to market its inaugural covered bond. At the same time Moody’s has rated the programme at Aaa.

Berlin Hyp (BHH) showed this week that investors are so hungry for short dated covered bonds that they are prepared to pay a negative yield for the privilege of owning them. Even so, it is unlikely that any other issuer will meet this extraordinary demand, writes Bill Thornhill.

Sbanken Boligkreditt, formally known as Skandiabanken, has said that it expects to take advantage of its newly established Euro Medium Term Note (MTN) programme for long-term funding to begin issuing euro denominated 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.