Covered Bonds

Fewer investors than is normal bought Stadshypotek’s seven year covered bond on Tuesday. However, although the deal had virtually no new issue concession, it was nevertheless well subscribed.

French government bonds and covered bonds strengthened on Monday providing an improved backdrop for all European issuers this week. But with ‘fat tail’ risk bubbling just below the surface, borrowers are being advised to press ahead with funding plans without delay.

French covered bond issuer BPCE attracted almost €1.4bn of demand for its seven year as the need to price over OATs conferred a generous new issue premium. But with French covered bonds trading much tighter than OATs in the 10 year tenor there is a growing sense that a new 10 year issue could soon price much tighter than France.

A triumvirate of covered bond issuers from Denmark and Norway enjoyed stellar demand for their euro covered bond benchmarks this week.

Proposals for the treatment of covered bonds in the net stable funding ratio (NSFR) could spur structural innovation, may incentivise issuers to manage collateral more efficiently and, according to Fitch, could spur secondary market trading.

Eika Boligkreditt showed it was immune to any concern over a possible Norwegian house price correction, as it priced a €500m seven year covered bond on Thursday flat to its curve.

Eika Boligkreditt has mandated leads for a €500m seven year covered bond from Norway, the second in that size and tenor that will be issued this week following one from Sparebank Vest Boligkreditt.

After nearly a month without 10 year benchmark covered bond supply, Dutch issuer Van Lanschot Bankiers returned to the market on Wednesday with a conditional pass through deal.

The Dutch covered bond issuer, Van Lanschot Bankiers has mandated leads for the first 10 year covered bond in nearly a month and the first Dutch conditional pass through (CPT) since May 2016. The deal emerges following a Fitch survey suggesting investors would like to see price differentiation between soft bullet and CPT maturities.

Investors wasted no time posting orders for Sparebank Vest Boligkreditt’s covered bond issued on Tuesday, a deal which ticked all the right boxes for maturity and spread, despite concerns from Moody's about the sustainability of Norwegian house prices.

Danske Bank showed enduring demand for five year covered bonds on Monday when it issued the first Danish covered bond in euros this year. In common with other deals issued in this part of the curve, the bonds quickly attracted a well oversubscribed order book.

Crédit Agricole tapped its 20 year covered bond on Monday at a spread that was almost twice as tight compared to OATs as the original issue. The success of the tap shows that the German insurance firms that bought the increase are focused on other metrics than the cost compared to government bonds.