Covered Bonds

The Swedish Covered Bond Corporation mandated leads for a euro covered bond benchmark as market participants prepare for another hectic week, following a substantial curve steepening this week.

Covered bond issuers from Europe’s core accessed the market across a range of intermediate tenors this week with LBBW, Compagnie de Financement Foncier (CFF) and Helaba issuing some of their largest deals in years.

DNB Boligkreditt got the Nordic covered bond market off to a blistering start on Wednesday with a €2bn five year deal that leads were able to tighten by 5bp from initial guidance.

Coventry Building Society received a strong reception for the first euro-denominated covered bond from a UK issuer since the UK Brexit referendum. Despite cheaper funding alternatives, the deal demonstrated Coventry’s strategic commitment to the euro market.

Four covered bonds issuers raised almost €6bn between them at the long end of the curve this week, suggesting borrowers are prioritising tougher, longer duration deals. And while conditions permit some are issuing in the largest size possible.

Royal Bank of Canada, Canadian Imperial Bank of Commerce, Commonwealth Bank of Australia and Deutsche Pfandbriefbank tapped the sterling covered bond market this week at cheaper levels than they could have achieved in euros and dollars.

With yields set to rise and spreads likely to widen, covered bond issuers should waste no time in getting ahead on 2017’s funding plans and doing the more difficult trades first.

Commonwealth Bank of Australia swept up remaining demand in the now saturated five year sterling covered bond market on Thursday, while Deutsche Pfandbriefbank (PBB) got a fair reception for the first three year floating rate covered bond of the year.

Coventry Building Society received a strong reception for the first euro-denominated covered bond from a UK issuer since the UK referendum to leave the European Union. Despite cheaper funding alternatives, the deal demonstrated Coventry’s strategic commitment to the euro market.

Euro covered bond issuers came to the market in size across a range of tenors on Thursday morning, as Compagnie de Financement Foncier (CFF) landed a €1.5bn six year deal and Helaba drew €2bn of funding with a five and 10 year Pfandbrief issues.

ABN Amro issued its third 15 year covered bond in three years on Wednesday and, in a surprise late addition, tacked on a sub-benchmark 20 year.

Royal Bank of Canada took advantage of deeper demand for fixed rate paper than floating in sterling covered bonds, issuing a five year trade on Wednesday. RBC has gathered more demand for its deal than Canadian Imperial Bank of Commerce, which issued a floating rate deal a day before.