Covered Bonds

Sparebank 1 Boligkreditt on Tuesday followed Commerzbank into the covered bond market. By coming 20bp back of Commerz, the Norwegian sale was much smoother.

Commerzbank and Sparebank 1 Boligkreditt have mandated leads for 10 year euro covered bond benchmarks after WL Bank issued a 10 year on Monday. Deutsche Pfandbriefbank is due with a dollar-denominated Reg S covered bond benchmark, while the main supply in capital comes from DBS Bank.

With a coupon of 0.10%, Monday’s €500m Pfandbrief from WL Bank had the lowest ever coupon on a benchmark 10 year covered bond — a result which Commerzbank was expected to follow.

French issuers could be drawn to opportunistic covered bond trades in the next few weeks, with French deals trading inside German Pfandbrief paper for the first time.

While the European covered bond pipeline is largely barren, Australian issuer Suncorp-Metway this week pulled in A$350m with the first Australian dollar denominated 10 year covered bond seen since 2014.

Luca Bertalot, secretary general of the European Mortgage Federation and European Covered Bond Council talks to GlobalCapital about Brexit, the Label, harmonisation, capital floors and a detailed look at the global expansion of covered bonds in the emerging market arena.

Australian issuer Suncorp-Metway pulled in A$350m with the first Australian dollar denominated 10 year covered bond seen since 2014.

Deutsche Pfandbriefbank is following fellow German issuer Landesbank Hessen-Thüringen (Helaba) into dollar denominated Pfandbrief, after mandating leads for a three year dollar deal on Tuesday.

While the European covered bond pipeline is barren, Australian issuer Suncorp-Metway is lining up a new Australian dollar-denominated 10 year covered bond, continuing its tradition of issuing in its home currency.

With an unreconciled order book of almost €800m, Commerzbank’s €250m negative yielding eight year Pfandbrief tap issued on Friday neatly illustrated the desperation of investors.

With new issue premiums set to rise and spreads prone to soften, the covered bond market could be set for a repeat of last year’s spread widening. But this time supply will be more limited, and any move wider won't last.

Landesbank Hessen-Thüringen (Helaba) priced the third dollar Pfandbrief benchmark of the year and is expected to be followed by a succession of dollar trades later in the year.