Covered Bonds

Deutsche Hypothekenbank has mandated leads for its first deal of the year, weeks after its owner NordLB said it was considering a sale of the bank. The high quality cover pool and choice of German law as the governing code will stand the deal in good stead, but uncertainty over borrower's future ownership could complicate matters.

SEB issued a tightly priced €1bn seven year covered bond on Tuesday, but the slim scale of oversubscription reflected investors’ resistance in the fatigued market.

Covered bond supply is expected to remain active as borrowers are planning strategic deals ahead of the half year end. Leeds Building Society is the latest issuer to add its name to the pipeline.

The Swedish financial supervisory authority (Finansinspektionen) has proposed tightening mortgage lending criteria in an effort to slow growth in household debt, a decision which analysts believe is likely to be positive for covered bonds.

The European Commission (EC) has confirmed it wants to create a more integrated covered bond framework in the European Union and explore the possibility of developing a market for European Secured Notes. Proposed amendments to the framework are likely to prove 'controversial', said market participants.

The Bank of Queensland (BOQ) has mandated joint leads to roadshow its newly set up conditional pass-through (CPT) A$3.25bn (€2.18bn) covered bond programme.

Suomen Hypoteekkiyhdistys (Hypo) and Bank of New Zealand have announced marketing programmes ahead of expected covered bond deals.

Skipton Building Society is looking to diversify its wholesale funding, and is expected to issue covered bonds and senior debt.

Berlin Hyp (BHH) issued a tightly priced Pfandbrief on Wednesday, drawing strong demand for a rare deal backed by green commercial mortgage assets. At the same time the Mortgage Society of Finland mandated leads for a sub-benchmark transaction.

Banco Popular Espanol’s covered bonds barely reacted to credit stress afflicting bonds further down its capital structure ahead of the Spanish lender’s resolution on Tuesday evening. This may have illustrated the effectiveness of the Covered Bond Purchase Programme (CBPP3) but also showed confidence in the asset class, the regulator and the Spanish banking system.

More active central bank buying has helped prop up peripheral covered bonds, which have seen better real money selling interest lately. Despite its troubles, covered bonds issued by the beleaguered Banco Popular Espanol (BPE) have held up.

Berlin Hyp (BHH) is expected to open order books for it second Green Pfandbrief on Wednesday and Bank of New Zealand has mandated leads to roadshow a possible senior or covered bond deal later this month.