Covered Bonds

Global political upheaval and rising dollar interest rates are likely to make 2017 a year of short issuance windows in covered bonds. Global Capital gauged the views of a number of funding heads and senior bankers on their approach to the market for the year ahead.

There is too much diversity in covered bond legal and supervisory frameworks to justify special regulatory treatment of all regimes and programmes, said Christian Moor, a policy advisor with the European Banking Authority, at the Afme and VDP covered bond conference in Berlin.

Covered bond spreads of Banca Monte dei Paschi di Siena widened further on Monday on modest volumes after Sunday’s Italian constitutional referendum and the resignation of prime-minister, Matteo Renzi.

Covered bond issuers and investors are readying themselves for political volatility in 2017 that will create patchy windows of market activity, according to panellists at the Afme/VDP covered bond conference in Berlin.

European Central Bank director general of market operations Ulrich Bindseil, said the central bank’s decision to raise repo haircuts for covered bonds with extendable maturities was purely for risk management purposes and should not be interpreted as a judgemental view of the structures.

National Australia Bank on Wednesday issued its second dollar benchmark of the year and managed to fund it at a tighter level than it could have hoped for in euros. However, the more conspicuous funding advantage for borrowers lies in sterling covered bonds.

The European Central Bank, the European Commission and the European Banking Authority are pulling in different directions when it comes to covered bonds with extendible maturity structures. Time for a bit of harmonisation.

Swedbank became the third non-UK issuer to launch a sterling covered bond since September with a rare five year offer on Wednesday.

National Australia Bank issued its second dollar benchmark of the year and managed to fund at a slightly tighter level than it could have hoped for in euros. However, the more conspicuous funding advantage is in sterling covered bonds

National Australia Bank has opened books for its second dollar-denominated covered bond of the year and the third in dollars from Australia this year.

Swedbank became the third non-UK issuer to launch a sterling covered bond since September, when it launched a rare five year on Wednesday. The high number of UK bank sterling redemptions that are unlikely to be refinanced next year suggests sterling investors will be cash rich and receptive to similar supply.

The European Central Bank, European Commission and the European Banking Authority are pulling in different directions when it comes to covered bonds with extendible maturity structures. Time for a bit of harmonisation.