Covered Bonds

Technical factors have strongly supported the Obbligazioni Bancarie Garantite (OBG) market, but the resignation of former Italian prime minister, Matteo Renzi, from leadership of the ruling Democratic Party (PD) may hurt the market over the next few months.

Landesbank Baden-Württemberg has priced the tightest covered bond of the year and was able to tighten pricing to a greater extent than any other German issuer this year.

Loans backed by energy efficient buildings could be less risky than conventional mortgages, and should receive better regulatory treatment, according to participants at the European Mortgage Federation-European Covered Bond Council’s (EMF-ECBC) stakeholder meeting held in Brussels on Thursday.

Nationwide Building Society this week issued its first euro benchmark covered bond since the UK’s referendum on leaving Europe and managed to find funding that was two years longer and half the spread of its last deal in February 2016. But it was unable to issue a 15 year.

Nationwide sold a €1bn seven year euro benchmark covered bond on Thursday, its first trip to the market this year.

Berlin Hyp issued a well oversubscribed €500m eight year mortgage backed covered bond on Wednesday and attracted exceptional demand from foreign investors, even though the deal was priced tightly.

BNP Paribas Home Loan SFH made a rare foray into the covered bond market on Wednesday, selling a €500m long seven year deal that was priced well through the French government bond curve.

With more than 100 investors in the book and an oversubscription ratio of nearly three times, Nord/LB’s Luxembourg subsidiary enjoyed one of the best receptions of any €500m covered bond seen this year and one that was much better than all its previous deals.

The Covered Bond Label Foundation (CBLF) granted its 100th label to the covered bond programme of Oversea-Chinese Banking Corporation (OCBC) on Tuesday signalling that the issuer could soon be ready to launch is debut deal.

Fewer investors than is normal bought Stadshypotek’s seven year covered bond on Tuesday. However, although the deal had virtually no new issue concession, it was nevertheless well subscribed.

French government bonds and covered bonds strengthened on Monday providing an improved backdrop for all European issuers this week. But with ‘fat tail’ risk bubbling just below the surface, borrowers are being advised to press ahead with funding plans without delay.

French covered bond issuer BPCE attracted almost €1.4bn of demand for its seven year as the need to price over OATs conferred a generous new issue premium. But with French covered bonds trading much tighter than OATs in the 10 year tenor there is a growing sense that a new 10 year issue could soon price much tighter than France.