Covered Bonds

Covered bonds not eligible for the European Central Bank’s covered bond programme (CBPP3) have been sought after in the secondary market, largely reflecting the fact that offers for CBPP3-eligible paper have become almost impossible to find.

The Market Abuse Regulation (MAR), which came into effect this month, is open to many different interpretations, undermines deal execution certainty and complicates the flow of information.

The Slovak covered bond market is too restrictive to provide proper funding but Moody’s expects the country’s covered bond law to be changed in the near future, which should gradually pave the way towards greater covered bond supply.

Clydesdale Bank reopened the UK RMBS market with the first deal following the UK referendum and paid double the spread of its previous deal. GE Money Bank in France is expected to finalise its RMBS on Friday.

The VDP’s newly appointed president, Dr Louis Hagen, has some strong, clear cut views on a wide range of topics affecting both the Pfandbrief and covered bond markets. He talks to The Cover about the implications of Brexit, covered bond supervision in the banking union, the Net Stable Funding Ratio, the leverage ratio, soft bullet extensions and harmonisation.

Canadian Imperial Bank of Commerce this week priced the first negative yielding non-Eurozone covered bond, with a well oversubscribed order book and a tiny new issue concession.

Commonwealth Bank of Australia drew more demand than any other euro denominated Australian covered bond in over three years when it issued a €1.25bn 10 year this week.

The covered bond programmes of six Turkish banks were put on review for downgrade by Moody’s on Thursday just as the only mortgage backed deal issued by Vakifbank widened further. Despite that, Batuhan Tufan, head of financial institutions at Garanti Bank, says Turkish banks are well capitalised and until now the economy had been in a strong position.

Commonwealth Bank of Australia issued a €1.25bn 10 year on Wednesday, attracting the highest level of oversubscription for any Australian issuer in euros in more than three years.

The floodgates to negative yielding covered bonds have taken four months to properly open, but with two such deals seen in less than a week, many should now follow.

The parent company of Caffil, the French public sector covered bond issuer, has finalised the first loan under its newly established export credit finance business. The Cover spoke to Caffil’s head of treasury and financial markets, Sami Gotrane, about the issuer’s prospective plans in the export finance business.

WL Bank enjoyed strong demand for its €250m 10 year covered bond tap on Tuesday, an increase that managed to provide investors with a positive yield. But with spreads in the secondary market tightening again on no flow, the positive yielding universe was quickly disappearing.