Covered Bonds

A debut green bond from Swedbank this week was the clearest indicator yet that green bonds can price more tightly and outperform the rest of the FIG debt market, including perhaps covered bonds, writes Jasper Cox.

Covered bond supply should start to improve in the next two weeks, with European holidays and blackout periods coming to an end. But it is doubtful that the expected increase in volumes will be sustained for long enough to meet the 2017 annual supply forecasts many analysts made last year.

Covered bond investors have reduced their exposure to peripheral markets according to analysts at Commerzbank research. Despite this, peripheral and higher yielding covered bonds have continued to outperform and could easily remain susceptible to squeezes, traders warn. The technically squeezed status quo may not change until the second half of 2018, they added.

The Slovakian government has approved an updated version of its covered bond law but while this is likely to improve on the existing framework further work may be needed.

Sparkasse Hannover has joined Wüstenrot Bausparkasse in the euro covered bond pipeline. Both issuers are likely to get strong executions for their sub-benchmark Pfandbriefe which may no longer need to offer a premium relative to benchmark deals. At the same time, Sparebank 1 Boligkreditt has mandated leads to market its first covered bond in sterling.

Anastasios Ioannidis, general manager of global markets at Eurobank Ergasias’ treasury, speaks to GlobalCapital about his bank’s covered bond, the bank’s competitive advantages, plans for non-performing loan sales and how sustained growth can cure Greece’s debt mountain.

The third covered bond purchase programme (CBPP3) will continue to exert a strong influence on the covered bond market for at least the next three quarters, though a material change could well start to impact the market in the latter part of next year.

The prospect of Greek banks issuing tier two capital early next year was heightened this week after two more of the country's big four institutions successfully printed covered bonds, writes Bill Thornhill.

Korean Housing Finance Corp (KHFC) enjoyed a strong reception for a five year covered bond this week. But the fact the deal was priced 25bp inside initial price talk yet still offered triple the pick-up to Canadian deals compared with last year, suggested a degree of uncertainty in the price discovery process.

Korean Housing and Finance Corporation (KHFC) has opened order books in dollars, Muenchener Hypothekenbank (MuHyp) is set to price a small Swiss Franc deal and Piraeus Bank has finalised terms for its floating rate bond that was mainly placed with supranationals.

Deutsche Hypo has mandated leads to market its inaugural green Pfandbrief, taking the number of German green covered bond issuers to two. But since the bank could be soon bought by the only other green Pfandbrief issuer, the universe might well return to one.

Stadshypotek took advantage of scant covered bond supply — particularly from Sweden in the 10 year area — to issue a tightly priced €500m deal on Tuesday.