Covered Bonds

UniCredit is seeking investors’ consent to substitute Fitch with Moody’s as credit rater of its conditional pass through covered bond programme. The latter requires an issuer to provide less collateral for a similar rating.

Poland’s largest covered bond issuer and national champion, PKO Bank Hipoteczny, has mandated leads to roadshow a prospective zloty-denominated covered bond benchmark.

The European Banking Authority (EBA) has approved a partial waiver to the Capital Requirements Regulation (CRR) that allows German covered bond issuers to take exposures to a wider range of counterparties but with a lower minimum rating.

Covered bond spreads have kept at tight but stable levels despite renewed selling of French and UK covered bonds on Tuesday. However, there is a growing sense that the market must ultimately move wider.

The European Commission is expected to outline plans for a covered bond framework in June, delegates at the European Covered Bond Council’s (ECBC) plenary session heard last week.

After a successful sale of €250m of seven year covered bonds in January, the Republic of Slovakia’s largest issuer, VUB, is now preparing for a 10 year sale, where it expects to issue €250m covered bonds in an auction on April 20.

March data from the European Central Bank showed that it has continued to reduce the share of bonds it buys in the secondary market, a trend that has been running since August 2016. Total purchases have also been falling for well over a year, but despite this slow-down, major price distortions continue to exist.

Yorkshire Building Society defied concerns around the UK’s decision to leave the European Union this week, issuing a well oversubscribed covered bond that was very broadly distributed and that priced almost flat to its curve.

Germany’s WL Bank priced a €250m tap of its 10 year mortgage backed Pfandbrief on Thursday, taking advantage of the squeezed market to price flat to its curve. Cheaper French covered bonds have performed well lately and profit taking was seen in the UK sector.

The heads of funding at DNB Boligkreditt and Royal Bank of Canada told delegates at this week’s IMN conference that investors are well protected from a potential fall in house prices. UK covered bonds are similarly resilient, said a director at Fitch Ratings. And even in a hard Brexit, the privileged position of covered bonds would be upheld by UK courts, said a partner at Clifford Chance.

SR Boligkreditt has issued its first Reg S dollar covered bond, and though the book was slow to build the issuer found enough demand to ensure the deal was eligible for bank liquidity portfolios in the liquidity coverage ratio (LCR).

FIG borrowers have wasted little time in bringing opportunistic offerings in front of investors this week, using strong issuance conditions to complete a number of projects ahead of the Easter break.