Covered Bonds

Singaporean issuer DBS Bank is set to close its first euro covered bond, four months after putting the transaction on hold.

Nordea Mortgage Bank (NMB) was set to issue its largest covered bond in three years with a well subscribed order book and a modest concession. At the same time, La Banque Postale returned with its now regular annual covered bond funding.

Core and non-eurozone covered bonds in the short to intermediate part of the curve were well supported on Friday after the European Central Bank said it would buy covered bonds with yield below its deposit floor.

The enduring nature of sterling covered bonds was underscored again this week with deals issued by Lloyds Bank and BayernLB taking this year’s total in the UK currency to six.

Covered bond deals issued this week by Société Générale and Erste Bank showed that there is still good demand for bonds issued by national champions, even in the more difficult longer tenors.

Ten year Pfandbrief €500m deals issued this week by NordLB and Bawag were narrowly oversubscribed even with the support of the Eurosystem.

As many as eight covered bonds were launched across three currencies this week, the vaguely discernible pattern suggesting better interest for the larger deals with intermediate maturities and particularly those from non-eurozone issuers where liquidity is most likely to be better.

Norwegian covered bonds could be in line for a ratings bump following implementation of the Bank Recovery and Resolution Directive (BRRD) said Standard and Poor’s. Separately, tighter Norwegian mortgage lending criteria should dampen house price inflation but it still remains unsustainably high, said Fitch.

BayernLB was set to issue its first sterling public sector Pfandbrief on Thursday with the latest order book update suggesting it had made good headway by paying a super attractive spread.

BayernLB has mandated leads for a possible three year sterling floater or short five year fixed rate transaction.

Société Générale SFH was set to issue a well oversubscribed mortgage backed seven year bond on Wednesday as Bawag shouldered a frostier reception for its public sector loan backed Austrian 10 year.

Erste Bank adopted a cautious pricing approach with its €750m 10 year Austrian Pfandbrief, which was priced on Tuesday when there was no other competing covered bond supply.