Covered Bonds

The Polish subsidiary of Commerzbank, mBank, has published the base prospectus for its €3bn covered bond programme, suggesting it could be ready to start a marketing drive leading to its first euro-denominated publicly syndicated deal.

On Tuesday, Bank of Montreal (BMO) issued the largest sterling covered bond from an overseas bank in almost three years at the tightest spread of any sterling covered bond in over two years. The level BMO achieved was far cheaper than would have been possible in euros or dollars.

HSH Nordbank issued a tightly priced €500m three year Pfandbrief on Tuesday. The transaction illustrates confidence in the safety of the Pfandbrief market, though little about conditions at the issuer.

The Canadian Imperial Bank of Commerce (CIBC) issued the largest and longest sterling Canadian covered bond seen this year on Monday and saved itself almost 10bp compared to where it could have funded in dollars and euros.

Crédit Agricole acted opportunistically on Monday on the back of last week’s bond sell-off to issue the first non-Swiss covered bond in Swiss francs since January 2016.

CaixaBank quietly priced a Cédulas Hipotecarias issue on Friday, only 3bp wider than where Nationwide recently issued. At 1.5%, the yield will have attracted big German insurers and at 33bp over mid-swaps the 15 year duration offered great funding for the borrower, especially in the context of a potential end to the European Central Bank's Covered Bond Purchase Programme.

Investors are sitting on plenty of cash but have little opportunity to do anything with it in the covered bond market as supply prospects look set to worsen. But with Bund yields breaking up from a long held range on Thursday and the possibility of the European Central Bank scaling back covered bond purchases, there are likely to be better buying opportunities at hand.

ABN Amro hit the covered bond market on Wednesday for an opportunistic tap of its 20 year, and despite being announced at short notice, the offering drew robust demand.

The European Parliament has approved a report that favours a principles-based approach to harmonising features of the European covered bond market.

Kommunalkredit Austria (KA) found strong demand for its high yielding Pfandbrief this week. It was the bank’s first deal since its was sold by the Austrian state, and the first Austrian covered bond that promotes financing with a social cause.

Some European bank liquidity portfolios are ‘materially non-compliant’ with the recommendations of the Basel Committee on Banking Supervision, because of the inclusion of covered bonds as high quality liquid assets, the BCBS said on Monday.

Crédit Agricole took advantage of last week’s sharp rise in swap rates and concerns that covered bond supply may dry up to issue a tightly priced €500m 10 year on Monday.