Covered Bonds

Commerzbank returned to the covered bond market on Wednesday to issue its fourth deal of the year. Although order book granularity was less than usual, the €500m long six year was priced tightly and the quality of interest was high.

Caja Rural Navarra pushed ahead with its seven year Cédulas Hipotecarias backed by environmental and social governance assets on Wednesday, even though it knew the market was likely to be unreceptive.

Issuers and their bankers have been too slow to react to the swift change in sentiment since the US election. That oversight became glaringly obvious this week with deals from BBVA and ANZ, but the mood swing was clear well before that.

Australia and New Zealand Bank issued its first euro-denominated covered bond in two years, but with less favourable market conditions investors have become more hesitant, and the deal attracted less than half the demand of one issued two months earlier by its New Zealand subsidiary.

Crédit Agricole took advantage of a relief rally in OATs to issue a €1.5bn covered bond on Tuesday which, by virtue of its seven year tenor, offered a larger pick-up to Bunds than any other maturity.

Covered bond harmonisation is likely to become a more urgent topic for issuers and local regulators after the European Banking Authority published the presentation that it is scheduled to discuss with market participants on Friday.

Nordea Mortgage Bank (NMB) has successfully issued its first deal. The choice of tenor, along with the issuer’s strong credit profile, and strong sentiment towards the Nordic region, were instrumental in achieving the positive outcome.

BBVA struggled to sell its €1bn Cédulas Hipotecarias issue on Monday because the maturity was too long and because of further rates volatility.

The sharp rise in yields that followed this week’s US election has improved yields bringing the five year tenor back into play in covered bonds. But the sell-off in OATs has left French covered bonds overvalued at the long end.

Commonwealth Bank of Australia drew strong demand for its five year Australian dollar covered bond tranches, but its 10 year was without doubt a struggle.

Sp Mortgage Bank, the central bank for Finnish savings banks, has mandated joint leads for a European roadshow to market its first covered bond.

National Australia Bank issued a rarely seen five year sterling denominated covered bond and showed a path that others may follow. It also sold a seven year senior deal in euros.