Covered Bonds

The Canadian rating agency has published a request for comment following a newly proposed rating methodology that introduces a new and higher rating gauge for systemically important banks called the Critical Obligations Rating (COR) criteria and which could lead to a covered bond rating upgrade at 11 banks.

Hypo Tirol overcame lingering concerns in the aftermath of the Heta Asset Resolution debacle to issue an oversubscribed and relatively well distributed five year Pfandbrief on Thursday.

Caixabank issued its largest Cédulas in five years on Monday. It was also the biggest since 2014 and enticed more investors than any Spanish deal in three years.

Concerns over the exodus of real money investors from the covered bond market were put to rest this week as a series of deals met exceptionally strong demand, with the sea change in sentiment being most conspicuous in the French sector.

Some investors and brokers are warming up to a controversial part of the upcoming Markets in Financial Instruments Directive that will force bank clients to buy fixed income research that traditionally they have gotten for free.

Crédit Mutuel CIC took advantage of the strong reception enjoyed by BPCE earlier this week to issue a €1.5bn long six year, the seventh deal of this size seen so far this year. The transaction was comfortably oversubscribed and the order book built rapidly.

Swedish issuer SEB launched a new five year covered bond on Thursday, and despite coming only a day after Swedbank’s well subscribed bond, pulled in a large book for a €1.5bn deal.

Hypo Tirol was never expected to be an easy trade given lingering concerns about Austria’s smaller banks and the aftermath of the Heta Asset Resolution debacle. So it was a relief when, on Thursday, the issuer managed to attract an oversubscribed and relatively well distributed order book for its €500m five year mortgage-backed covered bond.

Swedbank and SEB this week launched deals that attracted the largest order books and the widest distribution of any covered bonds issued this year, along with the smallest concessions.

Australia and New Zealand Banking Group took advantage of improved market conditions on Thursday to launch a new three year £500m floating rate covered bond. The funding was more competitive than what it could have achieved in the euro market.

Danske Bank has announced plans to shake up its covered bond programme, with a view to funding its Swedish home loan programme through a new local entity.

Attractive spreads have improved sentiment considerably in the covered bond market, but senior issuance remains elusive as cautious banks deal with gloomy data.