Covered Bonds

Berlin Hyp (BHH) has mandated leads for a three year covered bond that could be the first to have a negative yield.

After losing its Moody’s rating in November 2015, KA Finanz’s covered bonds received a new AA- rating from Standard & Poor’s last Friday and were indicated about 5bp tighter on Monday morning. The bonds are now likely to receive better regulatory treatment, though collateral transparency could be a problem, said research analysts at Commerzbank on Monday.

Nordea issued a notice on Friday seeking the consent of covered bond investors to agree to the terms of a deed poll and a new guarantee mechanism that will align its Finnish covered bond programme with its Danish, Norwegian and Swedish programmes. Moody’s says the proposal will not affect the credit rating.

Euro covered bond supply is up by more than 60% compared to this time last year, and with several new issuers emerging this year, last year’s record should be broken. But with the European Central Bank meeting due next week and quarter-end balance sheet considerations coming into play, activity is likely to slow in the weeks ahead.

United Overseas Bank sold a landmark transaction this week, printing the first euro-denominated covered bond from Asia, and plans to become a frequent issuer in the market.

Around 250 delegates attended the 10th LBBW European covered bond forum in Mainz on Thursday. Although the low yield environment is making life difficult for asset managers, relative value is returning and real money buyers are slowly coming back.

United Overseas Bank sold a landmark transaction this week, printing the first euro-denominated covered bond from Asia, and plans to become a frequent issuer in the market.

The primary market looked less stable on Thursday as a seven year euro deal from Bank of Nova Scotia and a sterling deal from Canadian Imperial Bank of Commerce were slow to build and barely oversubscribed. However, a competing euro seven year from Bankia found strong demand.

Overseas-Chinese Banking Corporation will become the third issuer from Singapore to set up a covered bond programme, its head of funding confirmed with GlobalCapital’s sister publication The Cover on Tuesday. Though similarly rated to Singapore’s other two issuers, OCBC’s business model is somewhat different.

Three covered bond issuers launched euro benchmarks on Wednesday with the inaugural transaction from United Overseas Bank of Singapore proving the main attraction. Sparebank 1 Boligkreditt and Belfius Bank also launched deals, with strong demand for the Belgian deal allowing the issuer to pay an extraordinarily tight new issue concession of 1bp.

Overseas-Chinese Banking Corporation will become the third issuer from Singapore to set up a covered bond programme, its head of funding confirmed with The Cover on Tuesday. Though similarly rated to Singapore’s other two issuers, OCBC’s business model is somewhat different.

Two inaugural issuers announced preparations for euro benchmarks on Tuesday. Denmark’s BRFkredit is planning to roadshow its first ever euro benchmark and Singapore’s United Overseas Bank has mandated leads for its first covered bond and the first to be issued in euros from Singapore.