Covered Bonds

The European Banking Authority’s recommendation that an issuer should have defaulted before a covered bond maturity can be extended could set a “perilous path” for Danish covered bonds warned DBRS in a note to clients. But the EBA said its recommendations are compatible with Danish law.

Rates markets have barely reacted in the aftermath of Thursday’s European Central Bank meeting, and covered bond issuance conditions are likely to remain constructive. Despite this, vigilance is required as the positive situation can easily lead to complacency.

Debut benchmark covered bonds issued this week by Banco di Desio e della Brianza and Nykredit were preceded by Danske Hypotek’s inaugural deal, and with new names expected to follow later this year, the number of active issuers should reach new heights.

Aareal Bank turned to the dollar market on Wednesday to issue a $625m three year Pfandbrief to fund its dollar assets, thereby avoiding the need to swap proceeds back to euros.

Credit Mutuel CIC showed that demand for duration is still strong, as it drew €2.2bn of interest for a €1.25bn covered bond that it launched on Wednesday on the eve of the European Central Bank’s policy meeting.

France, Tennet, NWB and Berlin Hyp are among the green and social bond issuers acclaimed in GlobalCapital's Sustainable and Responsible Capital Markets Awards 2017, which were announced on Tuesday in Amsterdam.

Banco di Desio e della Brianza attracted outstanding demand for its debut covered bond, reflecting its rarely seen juicy spread and a scarcity of Italian supply this year. At the same time investors were receptive to Raiffeisenlandesbank NiederÖsterreich-Wien's (RLB NÖ-Wien) first deal in two years.

Nykredit Realkredit attracted demand of over €1.5bn for its debut syndicated covered bond this week, a deal which despite being issued in rare floating rate format was readily absorbed by a new diversified group of mainly bank treasury investors.

After an absence of almost two years, Austria’s Raiffeisenlandesbank Niederoesterreich-Wien (RLB Noe-Wien) mandated joint leads for a seven year euro benchmark covered bond.

Compagnie de Financement Foncier (CFF) enjoyed stellar demand for its €1.25bn seven year covered bond on Monday and, despite pricing flat to its curve just a few days before the European Central Bank policy meeting and after another nuclear test from North Korea, the deal attracted extraordinary demand.

The covered bond pipeline is set to empty early next week as issuer remain mindful to avoid the window around the European Central Bank’s next meeting on Thursday.

German banks printed the only euro denominated covered bonds in the primary market this week, with Deutsche Pfandbriefbank and Berlin Hyp selling mortgage-backed deals in the belly of the curve.