Covered Bonds

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.

DBS Bank has mandated leads for a euro benchmark, capitalising on very tight spreads, the strong performance of its previous debut and a number of exceptionally well received seven year euro deals that have priced flat to mid-swaps.

Global covered bond primary volume across all currencies is set to rise by €25bn from 2017 to €150bn equivalent in 2018 according to analysts at Crédit Agricole research. Issuance will be boosted by new borrowers and refinancing of liquidity borrowed under the term long term refinancing operation (TLTRO).

Sparebank 1 Boligkreditt and Santander UK unearthed solid demand in the sterling covered bond market this week as the Norwegian issuer priced its first in the currency.

DNB Boligkreditt enjoyed great execution for its €1.5bn seven year covered bond on Thursday, but real money accounts switched out of more expensive deals in good size for the first time in months, suggesting investors have far less inclination to add to positions at prevailing spread levels than was previously the case.

Principality Building Society has picked banks to arrange a roadshow for a new sterling-denominated senior unsecured bond, marking the issuer’s first visit to the market in any currency since before the financial crisis.

Covered bond investors remain unperturbed by spreads to swaps that are at near-historically tight levels, as the relative values to government bonds and senior unsecured remains alluring.

Compagnie de Financement Foncier (CFF) this week issued one of the most oversubscribed French covered bonds in years with demand boosted by the long tenor, small deal size and positive spread. At the same time, SEB found good demand, even though it was issuing the tenth 10 year covered bond since September.

Specialist mortgage bank Muenchener Hypo (MuHyp) and savings bank Sparebanken Vest, which typically fund in covered bonds, are both looking for unsecured funding this week. MuHyp is looking to tap one of its strongly performing senior issues, while Sparebanken Vest is marketing its debut senior unsecured issue in euros.

SpareBank 1 Boligkreditt unearthed solid demand for its first covered bond in sterling, managing to price at the tight end of guidance with a comfortably oversubscribed book, despite issuing in the more challenging five year tenor.

Achmea Bank has mandated leads to market its inaugural conditional passthrough covered bond programme, with the bank eyeing a €500m seven year deal.

Around five borrowers are expected to launch covered bonds next week and take advantage of tight spreads, strong market conditions, an absence of holidays and fewer blackout periods.