Covered Bonds

The relentless growth in active covered bond issuers was in evidence last week as Danske Bank’s Swedish subsidiary received regulatory approval, Santander Consumer Finance AG tested its newly rated programme, and DZ Bank received a rating for its unique Bank Briefe.

Covered bonds should help improve asset-liability matching for Andorra Banc Agricol Reig (Andbank), said its director of its financial institutions group, Paco Collell.

Order book momentum for the first Australian conditional pass through (CPT) issued by Bank of Queensland (BoQ) was quick to build when the deal was finally launched on Thursday, owing to the “eye-catching” initial spread.

DG Hyp and WL Bank are pushing ahead with merger plans in a move that will create one of the largest Pfandbrief issuers. The merger follows a series of other Pfandbrief mergers, new entrants and wind-downs.

Andorra Banc Agricol Reig S.A. (Andbank) has mandated JP Morgan for a roadshow ahead of its first covered bond. The deal will not fall within a legal covered bond framework.

Part of the selling point of covered bonds is that they are a relatively easy to understand, safe investment. But this has become less true over time, especially in conditional pass through structures. It's time for a more unified approach.

After mandating leads on Monday, market participants expected Bank of Queensland’s (BoQ) debut covered bond would emerge on Tuesday. The deal’s absence from a quiet market led to speculation of a minor teething problem with leads confirming the deal is still being being worked on.

Leads Building Society extended its covered bond curve by four years on Monday with a €500m seven year covered bond that was priced with little new issue premium. The transaction is expected to be followed by Bank of Queensland’s first covered bond.

The European Parliament’s economic and monetary affairs committee (Econ) has voted on an own-initiative report on covered bond harmonisation and outlined a three tier approach to the asset class. The committee proposing distinguishing between premium covered bonds (PCBs), ordinary covered bonds (OCBs) and European Secured Notes (ESNs). The new categorisations are supposed to prevent regulatory cliff effects.

Amalgamation of the German covered bond sector looks set to endure as Berlin Hypothekenbank (Berlin Hyp) will potentially subsume Deutsche Hypothkenbank, a subsidiary of NordLB which it is considering selling. In a separate development, the cover pools of Westdeutsche ImmobilienBank (WestImmo) will be fused with those of Aareal Bank.

Covered bond investors have begun to push back on aggressively priced deals, and with spreads close to the tightest in a decade there is a growing belief that they will widen.

Bank of New Zealand (BNZ) issued an oversubscribed €750m seven year covered bond this week, meeting its size and spread ambitions despite concerns about the outlook for spreads.