Covered Bonds

Covered bonds are well supported but markets have seen profit-taking on an asset swap basis reflecting the view that spreads are expected to go wider in coming months, traders told GlobalCapital on Wednesday.

Oversea-Chinese Banking Corporation (OCBC) stepped into the euro covered bond market for the first time with a well received €500m deal that capitalised on strong technical demand in the five year part of the curve.

Crédit Agricole Cariparma priced the first Obbligazioni Bancarie Garantite of the year on Tuesday, with the two part long-dated transaction attracting demand of almost €3bn and printing at a record spread through BTPs.

Patrick Seifert will become head of primary markets at Landesbank Baden-Württemberg, taking over from Patrick Steeg who will move to the firm’s asset and liability management business.

Crédit Agricole Cariparma is expected to issue the first Italian covered bond of the year after it mandated leads for an eight and 12 year which is likely to be launched on Tuesday. The offering takes advantage of technically squeezed market conditions exacerbated by the lack of peripheral European supply.

Oversea-Chinese Banking Corporation Limited (OCBC) will become the third Singaporean borrower to issue a euro-denominated covered bond this year and is expected to open order books for its debut deal on Tuesday. The deal is going to be a rare five year, so it is likely to get good execution.

Strict asset encumbrance limits imposed by regulators in Canada and Singapore could be increased, in a move that could improve covered bond supply from the two regions.

Volksbank Wien could be preparing to launch its first publicly syndicated euro covered bond after Moody’s published a presale report and assigned a top rating to its covered bond programme on Thursday.

Ship financing has been through a torrid time as falling prices have tested and broken the business models of the main German lenders — and so the ship-backed Pfandbrief market has virtually run aground. But Danmarks Skibskredit, an established Danish shipping lender with a strong track record, is mulling a euro-denominated shipping covered bond, and trying to change investors' views of the product, delegates heard at the LBBW covered bond forum on Thursday.

Toronto Dominion had less luck than its Canadian peers when it issued the third sterling Canadian covered bond of the year this week. Even though the transaction offered a hefty concession there was only sufficient demand to issue in half the size of the previous deals.

Covered bonds issued this week by Axa Bank and Lansforsakringar Hypotek (LF Hyp) were priced at — or inside — fair value, partly reflecting a technical squeeze that was aggravated by the European Central Bank’s move to step up purchases in the secondary market.

The European Central Bank has stepped up secondary covered bond purchases to compensate for slower primary activity and has exacerbated a technical squeeze. But with the central bank expected to announce a tapering of asset purchases after summer the squeeze could reverse, and spreads could end the year much wider.