Covered Bonds

The one and only euro benchmark Turkish covered bond issued by Vakifbank widened slightly on Monday but then more sharply on Wednesday following the attempted coup over the weekend. Covered bond investors said the episode would provide a good test case for emerging market covered bonds.

Canadian Imperial Bank of Commerce priced the first negative yielding non Eurozone covered bond and attracted a comfortably oversubscribed order book with a tiny new issue concession.

CaixaBank has announced a reorganization of its debt capital markets team, which will now be led by Ainhoa Landa — the former head of structured bonds syndicate. Landa will report to Ignacio Moliner, head of capital markets and corporate finance.

With an oversubscription ratio of more than five times, Deutsche Hypo’s tap, issued on Friday, should put to rest qualms that have hindered supply of negative yielding covered bonds since Berlin Hyp’s ground breaking deal four months ago.

Piraeus Bank has become the third of the four largest Greek banks to update its covered bond programme in what is likely to be a prelude to issuance.

The covered bond primary market was kept busy this week as a trio of German banks supplied the market in euros and dollars across a range of maturities.

The conditional pass through (CPT) covered bonds issued by Aegon Bank should trade tighter than other Dutch CPTs, say analysts at Commerzbank research. Bankers say all CPT Dutch bonds should perform, as they are one of a few in core Europe that still offer a positive spread to mid-swaps.

Piraeus Bank has become the third of the four largest Greek banks to update its covered bond programme in what is likely to be a prelude to issuance.

Nykredit, the Danish lender, has improved its loss absorbing capacity and rating outlook with new ‘tier three’ instruments that are expected to replace maturing junior covered bonds.

The Eurosystem purchased fewer covered bonds last week than a week earlier reflecting a slowdown in primary activity twinned with increasing difficulty sourcing bonds in the squeezed secondary market. This has been most conspicuously felt at the long end of core markets where positive yields may soon disappear.

The Basel Committee on Banking Supervision has updated its framework for the regulatory capital treatment of securitization. The reduction in minimum capital requirements for deals that meet “simple, transparent and comparable” (STC) criteria will bring the risk weight into line with covered bonds.

The covered bond primary market was kept busy on Tuesday with two Pfandbriefe issued in euros and dollars at the opposite ends of the curve. Though market conditions are constructive, bankers are concerned that the outlook will not look as pretty after the summer break.