Covered Bonds

Financial institutions took a step back from the primary market on Thursday, as a resurgence in US political risk helped stunt an impressive rally and push credit spreads wider.

The Bank of Queensland’s (BoQ) conditional pass through (CPT) covered bond works differently from Dutch CPTs as there is a higher likelihood of prepayment.

Green covered bonds have been slow to take off, but the greater flexibility offered by European Secured Notes (ESNs) should have broader appeal for borrowers and investors alike.

After adding more green loans to its cover pool, Berlin Hyp (BHH) is now ready to return to the Pfandbrief market and on Tuesday mandated leads for a roadshow ahead of its second green mortgage-backed deal.

Sparkasse Hamburg extended its curve and priced a Pfandbrief inside fair value with good demand this week. At the same time Hypo Tirol paid a relatively small concession for its sub-benchmark Pfandbrief, suggesting any lingering concern over Austrian covered bonds following the Heta saga has been put to rest.

Kommunalkredit Austria AG said on Monday that it had accepted all validly tendered bonds following its offer published May 4.

Hamburger Sparkasse has mandated joint leads for its second publicly syndicated Pfandbrief which is expected to be launched on Tuesday.

The list of Norwegian covered bond issuers entering the euro market continues to grow with Møre Boligkreditt (Morebo) mandating joint leads to roadshow its deal in the single currency.

Barclays has priced the tightest sterling covered bond since January 2015 and attracted more demand than for any sterling covered bond ever issued.

The primary covered bond market is expected to be active next week with four or five deals potenitially surfacing, in addition to the five being actively marketed. But non-eurozone bonds are being better offered, and the global interest rate outlook is becoming less accommodative.

Royal Bank of Scotland this week gave capital markets the clearest view yet of how banks are set to re-engage with the covered bond market as a staple source of financing, as the sector comes under pressure to wean itself off the special fundings schemes set up by the Bank of England and the European Central Bank.

Rabobank plans to roadshow its debut covered bond next week, while Banco Comercial Portugues will begin marketing a deal after an eight year absence. And after publishing an offering circular this week, Bank Queensland (BOQ) is expected to announce its first deal soon.