Covered Bonds

Eurozone banks could be forced to raise up to €135bn of extra capital to offset planned changes to the treatment of sovereign debt holdings, Fitch said on Wednesday.

Bank of Montreal (BMO) has opened books for its third covered bond benchmark of the year but its first in dollars in four years. The deal follows a string of successful transactions in the US currency issued by BMO’s Canadian peers at progressively tighter spreads and in larger sizes.

Nykredit issued the first contractually bail-inable senior debt on Monday, in a well-received deal that could set the tone for the growth of the asset class in Europe.

Competition is becoming much fiercer in the Turkish banking sector. After years of rampant loan growth in many markets, banks will have to fight much harder to find new customers and bigger margins in the future.

Westpac New Zealand issued a comfortably oversubscribed €750m five year covered bond on Tuesday and priced at the tightest spread ever for a New Zealand covered bond. At the same time, NordLB’s Luxembourg subsidiary issued a less well subscribed €500m seven year.

BRFkredit, the Danish mortgage bank, has mandated leads for a roadshow.

Delta Lloyd Bank’s €500m Dutch RMBS deal was priced on Tuesday and benefitted from strong technical support as investors scramble for paper. The swapless bonds also feature more than usual credit enhancement as well as low risk NHG-guaranteed collateral that may soon become scarce.

The Luxembourg subsidiary of NordLB will issue its longest covered bond yet, and one that should offer a double digit return, though covered bonds issued by German banks invariably price and trade well through mid-swaps.

The New Zealand subsidiary of Westpac has mandated leads for the second five year euro denominated benchmark of the year from a New Zealand bank. The deal follows an investor roadshow that was completed last week

Several borrowers are expected to launch covered bonds next week, and though some bankers have their doubts that the market will be as busy as this week, others say that superb market conditions will tempt opportunistic borrowers to move ahead with short notice.

Banca Popolare di Milano and Banco Sabadell issued covered bonds which, despite their negligible new issue concessions, met with exceptionally strong demand.

After a slow start to the week, a torrent of covered bonds was priced on Wednesday and Thursday, as issuers sought to move quickly in case the market succumbs to one of many potential political risks it faces this month.