Covered Bonds

March data from the European Central Bank showed that it has continued to reduce the share of bonds it buys in the secondary market, a trend that has been running since August 2016. Total purchases have also been falling for well over a year, but despite this slow-down, major price distortions continue to exist.

Yorkshire Building Society defied concerns around the UK’s decision to leave the European Union this week, issuing a well oversubscribed covered bond that was very broadly distributed and that priced almost flat to its curve.

Germany’s WL Bank priced a €250m tap of its 10 year mortgage backed Pfandbrief on Thursday, taking advantage of the squeezed market to price flat to its curve. Cheaper French covered bonds have performed well lately and profit taking was seen in the UK sector.

The heads of funding at DNB Boligkreditt and Royal Bank of Canada told delegates at this week’s IMN conference that investors are well protected from a potential fall in house prices. UK covered bonds are similarly resilient, said a director at Fitch Ratings. And even in a hard Brexit, the privileged position of covered bonds would be upheld by UK courts, said a partner at Clifford Chance.

SR Boligkreditt has issued its first Reg S dollar covered bond, and though the book was slow to build the issuer found enough demand to ensure the deal was eligible for bank liquidity portfolios in the liquidity coverage ratio (LCR).

FIG borrowers have wasted little time in bringing opportunistic offerings in front of investors this week, using strong issuance conditions to complete a number of projects ahead of the Easter break.

Delegates attending the 10th annual IMN covered bond conference in London on Tuesday were unperturbed by the possible end of the ECB's covered bond purchase programme (CBPP3).

SR Boligkreditt is set to follow its Scandinavian peers and has mandated leads for its debut Reg S covered bond in dollars.

Yorkshire Building Society issued a €500m six year covered bond almost flat to its curve with strong demand on Monday. At the same time Commonwealth Bank of Australia priced a €750m seven year, a solid trade but one that lacked sparkle.

Yorkshire Building Society could kick-start covered bond issuance in the second quarter, as it lines up to sell its first deal in the format since late 2015.

Westpac NZ issued a chunky €1bn euro covered bond on Thursday, with leads adopting a cautious approach to pricing at first, tightening the deal by 5bp in syndication to reach a record spread for a New Zealand issuer in euros.

Westpac Securities NZ has mandated banks for a new five year euro covered bond after finishing a roadshow this week.