Covered Bonds

As many as eight covered bonds were launched across three currencies this week, the vaguely discernible pattern suggesting better interest for the larger deals with intermediate maturities and particularly those from non-eurozone issuers where liquidity is most likely to be better.

Norwegian covered bonds could be in line for a ratings bump following implementation of the Bank Recovery and Resolution Directive (BRRD) said Standard and Poor’s. Separately, tighter Norwegian mortgage lending criteria should dampen house price inflation but it still remains unsustainably high, said Fitch.

BayernLB was set to issue its first sterling public sector Pfandbrief on Thursday with the latest order book update suggesting it had made good headway by paying a super attractive spread.

BayernLB has mandated leads for a possible three year sterling floater or short five year fixed rate transaction.

Société Générale SFH was set to issue a well oversubscribed mortgage backed seven year bond on Wednesday as Bawag shouldered a frostier reception for its public sector loan backed Austrian 10 year.

Erste Bank adopted a cautious pricing approach with its €750m 10 year Austrian Pfandbrief, which was priced on Tuesday when there was no other competing covered bond supply.

Toronto-Dominion Bank and Bank of Nova Scotia issued dollar and euro covered bonds on Monday, respectively, with both issuers targeting the five year part of the curve.

German Landesbank NordLB issued a €500m 10 year Pfandbrief backed by public sector loans on Monday. The deal had a narrowly oversubscribed order book despite offering a fair new issue concession. Meanwhile, Austria's Erste Bank has mandated leads for a Pfandbrief backed by mortgages.

Swedbank and Swedish Covered Bond Corporation rapidly attracted solid oversubscriptions for their €1bn five and seven year covered bonds that were priced with a minimal concession on Monday.

Lloyds Bank tapped the covered bond market for a three year floating rate deal on Monday, the fourth year in a row that it has issued the instrument in early January.

Investor Access, a platform which allows investors to submit orders for a new bond issue directly into the order book was deployed for the first time last week on a Commonwealth Bank of Australia sterling covered bond. Now work is underway to convince more dealers of the initiative’s worth.

The dollar covered bond market is in good shape, and it seems likely that issuers will want to follow the success of Bank of Montreal which last Wednesday issued the first benchmark of the year at a cheaper cost and in larger size than its previous deal issued six month ago.