Covered Bonds

In contrast to most other research teams, which are predicting unchanged or higher covered bond primary volumes next year, analysts at Commerzbank expect gross supply to decline.

Mediobanca took advantage of robust market conditions, the limited funding window left this year and the growing possibility of peripheral rates volatility next year to issue a €750m 12 year covered bond at a considerably lower level than BTPs.

Several firsts were set in the covered bond market this week by issuers in Singapore, the Netherlands, Denmark and Germany. But at €1bn, OP Mortgage Bank’s long five year stood out for being not only the tightest Nordic deal ever issued in euros but also for being double the size of the others.

Achmea Bank has issued its first conditional pass through covered bond, pricing in exactly the same steps with the same final result as Aegon had earlier this week.

Deutsche Hypo issued its first green Pfandbrief flat to where it would have issued a vanilla deal, and though it was unable to tighten the spread from refined guidance, leads built the book in record time.

OP Mortgage Bank was set to price the first €1bn sized covered bond of the week on Wednesday and, despite offering hardly any new issue premium, the transaction found strong demand reflecting a popular but exceptionally rare tenor. At the same time, Switzerland's Valliant Bank issued its debut covered bond and Sparkasse Hannover issued a sub-benchmark Pfandbrief.

Some weaker days in the secondary market have focused minds on market conditions going into the final weeks of trading for the year. But investors are still lapping up covered bonds.

Santander Consumer Bank is set to issue its first Pfandbrief on Wednesday after it mandated lead managers for a roadshow last week.

DBS Bank became the first covered bond issuer from Singapore to price a deal through mid-swaps on Tuesday.

Aegon Bank smashed through the mid-swaps flat barrier to price its first conditional pass through (CPT) covered bond substantially below the reference rate on Tuesday. The deal’s success implied that investors saw through the weakness of the structure to the strong credit, or that they have lost their capacity to price extension risk.

Danske Bank extended its covered bond maturity curve by more than five years on Tuesday, breaking with tradition to price in line with where SEB recently issued.

Austrian lender Raiffeisenlandesbank Oberösterreich (RLB OÖ) issued its first unsecured deal on Tuesday — and plans to bring one or two more benchmark transactions in covered or senior next year.