Covered Bonds

The Dutch subsidiary of the insurance giant issued a highly oversubscribed €500m seven year conditional-pass through on Wednesday and paid a minimal new issue premium. At 3.5 times, the oversubscription ratio was higher than any Dutch covered bond issued in the last four years.

The bank that issued the first jumbo Pfandbrief, a transaction that sparked a transformation of the covered bond market from its parochial German roots into a globally renowned asset class, has finally been wound down.

Aegon Bank has mandated joint leads for a seven year, the fourth Dutch covered bond of the year and the second with a conditional pass-through mechanism.

After recently issuing its debut RMBS, TSB Bank, the UK bank that was spun off from Lloyds, has filed vehicles suggesting it will turn to covered bonds.

The French government is expected to unveil a draft amendment to its covered bond laws, aligning the Société de Crédit Foncier (SCF) and Société de Financement de l’Habitat (SFH) frameworks, which should mainly benefit Axa Bank.

Investors derided the covered bond conditional pass-through (CPT) mechanism at the CEE Covered Bond Forum held this week in London. They said the structure had been mispriced and would give regulators a strong disincentive to intervene on behalf of noteholders.

Philip Bennett, chief operating officer at the European Bank for Reconstruction and Development (EBRD), said that 2016 was “finally” the year that progress would be seen in the nascent central and eastern European covered bond market.

DG Hyp and Deutsche Hypo launched the only two benchmark covered bonds of the week, and though both deals were priced tightly, they attracted a lot of demand.

TSB Bank is planning to hit the market with its second UK prime RMBS deal, following its first quarter results which showed strong growth in its mortgage lending.

Germany’s WL Bank has tapped an ultra-long dated covered bond by €250m, following a similarly sized tap, also at the long-end of the curve, undertaken by Caffil earlier this week.

BRRD does not specifically link covered bonds to a particular resolution strategy. This uncertainty is less of a concern for large systemic banks, but because smaller failing banks are less likely to be resolved, their covered bonds are at higher risk of default, said Moody’s.

The European Mortgage Federation-European Covered Bond Council (EMF-ECBC) on Wednesday responded to the European Banking Authority's (EBA) December report on the Net Stable Funding Ratio and has requested special treatment for covered bond structures where the matching principle is enshrined in law.