Covered Bonds

After a strong start to this year some bankers are beginning to question whether the volumes over the remainder of the year are too optimistic.

Covered bond investors believe new issue premiums will probably rise in the near future leading to a repricing of the market. But with buyers anxious to put their glut of cash to work in almost anything, the prospective move is likely to prove moderate.

HSBC and Nordea looked to reopen euro issuance for FIG borrowers this week, as investors showed strong appetite for riskier and higher yielding debt after the summer period.

DNB Boligkreditt issued a larger than average euro benchmark 10 year covered bond on Tuesday at a spread that was arguably flat to its curve illustrating solid demand for non-Eurozone deals that still of a substantial pick-up to core markets.

Raiffeisenlandesbank Oberosterreich has mandated joint leads for its first benchmark euro covered bond.

The universe of active covered bond issuers is set to further expand with the Bank of Queensland hiring leads to explore options for a potential covered bond structure.

The outlook for euro-denominated primary covered bond volumes may be revised lower over the course of this year as cheap dollar senior unsecured funding and negative euro yields hinder prospects.

Following an internal restructuring, Credit Suisse has asked covered bond holders for their consent to amend the definition of an issuer event of default (EoD).

ANZ New Zealand and Natixis Pfandbriefbank have mandated leads to roadshow euro denominated covered bonds.

Sparebank 1 Boligkreditt followed Commerzbank into the covered bond market this week with another 10 year and with a 20bp premium to the German lender, its sale was a lot smoother.

UniCredit Italy took advantage of constructive conditions and scarce Italian covered bond supply to launch a 10 year on Wednesday. The bank was rewarded with a well oversubscribed order book while paying little new issue premium.

A surfeit of supply hit the long end of the covered bond curve this week as issuers piled in to take advantage of extraordinarily cheap funding conditions that are unlikely to last long. Bill Thornhill reports.