Covered Bonds

A triumvirate of covered bond issuers from Denmark and Norway enjoyed stellar demand for their euro covered bond benchmarks this week.

Proposals for the treatment of covered bonds in the net stable funding ratio (NSFR) could spur structural innovation, may incentivise issuers to manage collateral more efficiently and, according to Fitch, could spur secondary market trading.

Eika Boligkreditt showed it was immune to any concern over a possible Norwegian house price correction, as it priced a €500m seven year covered bond on Thursday flat to its curve.

Eika Boligkreditt has mandated leads for a €500m seven year covered bond from Norway, the second in that size and tenor that will be issued this week following one from Sparebank Vest Boligkreditt.

After nearly a month without 10 year benchmark covered bond supply, Dutch issuer Van Lanschot Bankiers returned to the market on Wednesday with a conditional pass through deal.

The Dutch covered bond issuer, Van Lanschot Bankiers has mandated leads for the first 10 year covered bond in nearly a month and the first Dutch conditional pass through (CPT) since May 2016. The deal emerges following a Fitch survey suggesting investors would like to see price differentiation between soft bullet and CPT maturities.

Investors wasted no time posting orders for Sparebank Vest Boligkreditt’s covered bond issued on Tuesday, a deal which ticked all the right boxes for maturity and spread, despite concerns from Moody's about the sustainability of Norwegian house prices.

Danske Bank showed enduring demand for five year covered bonds on Monday when it issued the first Danish covered bond in euros this year. In common with other deals issued in this part of the curve, the bonds quickly attracted a well oversubscribed order book.

Crédit Agricole tapped its 20 year covered bond on Monday at a spread that was almost twice as tight compared to OATs as the original issue. The success of the tap shows that the German insurance firms that bought the increase are focused on other metrics than the cost compared to government bonds.

Almost two years after Moody’s and Fitch changed their rating criteria to take account of the Bank Resolution and Recovery Directive, Standard & Poor’s has set out how it plans to build resolution regimes into its ratings.

The relentless rise in French government bond yields this year has started to disrupt demand for French covered bonds, a trend which will hold until at least May when the country’s presidential elections are over.

Following the publication of primary covered bond legislation two years ago, Brazil’s central bank this week launched a public consultation on draft secondary covered bond legislation.