Covered Bonds

Royal Bank of Scotland this week gave capital markets the clearest view yet of how banks are set to re-engage with the covered bond market as a staple source of financing, as the sector comes under pressure to wean itself off the special fundings schemes set up by the Bank of England and the European Central Bank.

Rabobank plans to roadshow its debut covered bond next week, while Banco Comercial Portugues will begin marketing a deal after an eight year absence. And after publishing an offering circular this week, Bank Queensland (BOQ) is expected to announce its first deal soon.

Westpac enjoyed a strong covered comeback for a two part euro offering on Thursday and, despite concerns about the performance outlook for non-eurozone bonds, the transactions were priced with barely any concession.

Rabobank has mandated leads to take its debut covered bond on the road. Covered bonds will improve Rabobank’s net interest margin and help diversify its investor base, the bank’s global head of long term funding, Sjaak-Jan Baars, told GlobalCapital.

The Bank of Queensland (BOQ) has published an offering circular for its newly established covered bond programme rated triple-A with Fitch and Moody’s, suggesting a roadshow could soon be announced for the first Australian conditional pass-through covered bond.

After Banco Santander Totta broke the two year Portuguese covered bond hiatus with a well performing seven year in April, Banco Comercial Portugues has mandated leads for its first covered bond since 2009.

Vorarlberger Landes-und Hypothekenbank (Vorhyp) pulled in a lot more demand for its seven year covered bond on Wednesday than De Volksbank was able to muster for a lower-rated 10 year.

Banks dived into the primary market on Wednesday, following Emmanuel Macron's victory in the French election and as reporting season passed its busiest point. Borrowers are looking to follow a recent string of new deals that have been priced with close to no new issue premium.

Two Austrian banks and a Dutch bank have mandated leads for covered bond deals taking the number of banks in the covered bond pipeline to six.

After a five year absence, Royal Bank of Scotland returned to the covered bond market on Tuesday selling larger than expected and well oversubscribed sterling and euro benchmarks that were priced tight to fair value.

Compagnie de Financement Foncier attracted the largest order book in over two years for a deal of its size when it issued a €1.5bn 5.5 year Obligations Foncières on Tuesday. The deal was priced through fair value causing CFF's older bonds to reprice.

Legislators in the Czech Republic and Austria are in the process of updating their covered bond laws and Lithuania has set out its intention to introduce a framework.