Covered Bonds

The Swedish issuer was lucky to raise €1bn of six year funding on Monday in the context of a weaker credit market, tight overall spreads and ultra-low yields. Bankers do not believe such execution would have been possible had the deal been postponed by even one day.

Spanish elections and narrowing polls on the UK's referendum on EU membership are taking their toll on bank debt markets with a sole Nordic covered bond out to keep investors entertained on Monday.

Bank of New Zealand (BNZ) issued its first covered bond in four years and enjoyed a solid reception. The bonds offered a double digit spread over the Australian parent and a fair pickup to where this week’s deal from Westpac New Zealand was indicated.

The European Commission’s impending proposal on the prudential treatment of sovereign bonds could boost the appeal of covered bonds, said Fitch in a report this week.

Strong demand helped two Dutch issuers bring €500m RMBS deals this week, with Obvion opting to boost the deal size of its market-first green RMBS after building a bumper order book dominated by dedicated green investors.

NordLB’s Luxembourg subsidiary issued its longest maturity covered bond on Tuesday and paid a paltry premium, but the double digit pick-up failed to draw much excess demand.

BRFkredit, the Danish mortgage bank, has mandated leads for a roadshow and aims to issue its second euro benchmark covered bond.

Westpac New Zealand’s €750m five year this week attracted the largest order book and was priced at the tightest ever spread for a New Zealand covered bond. Bank of New Zealand is set to follow.

Bank of Montreal (BMO) issued its debut dollar legislative covered bond on Thursday, achieving the tightest spread of any covered bond issued this year in the currency.

Fitch may assign a rating uplift to Italian SME covered bonds, or Titolo Obbligazionari Collateralizzati. The upbeat rating assessment follows a survey conducted by analysts at Société Générale which suggests more than 40% of covered bond investors would consider buying such deals.

Bank of New Zealand has mandated leads for the second Kiwi covered bond of the week. At the same time Suncorp Metway announced plans to issue an Australian dollar benchmark and UBI Banca has issued a tap.

The Bank of Montreal has priced its first covered bond in dollars since Canadian covered bond legislation was implemented in June 2012. Having been out the market for so long, the deal benefitted from “scarcity value” and was priced with no new issue premium.