Covered Bonds

Crédit Agricole has launched a tender offer for seven series of outstanding covered bonds issued between 2010 and 2013, totalling up to €2bn. The bank has also announced that its subsidiary Credit Agricole Home Loan SFH will seek consent to switch its outstanding covered bonds to a soft bullet structure.

Intesa SanPaolo has captured the strong improvement in peripheral market sentiment with its €1.25bn seven year covered bond issued on Friday which attracted the highest order book of the year. At the same time Sparebanken Sør Boligkreditt has mandated leads for its debut covered bond.

The European Central Bank’s latest raft of stimulus is likely to restrict market-based short term funding and could lower covered bond supply at the short end. But covered bonds are likely to remain the most efficient tool for term funding, said bankers, two of whom confirmed they had heavy pipelines.

After over a month with no Obligations Foncières supply, Caisse Française de Financement Local (Caffil) and Compagnie de Financement Foncier (CFF) returned to the primary covered bond market on Monday.

BBVA priced a well oversubscribed €1.25bn seven year with barely any new issue concession and a long way through the Kingdom of Spain’s spread.

Toronto-Dominion Bank (TD) and National Australia Bank (NAB) raised more than €3bn this week in the US dollar denominated covered bond market, nearly doubling supply seen so far this year.

Berlin Hyp (BHH) issued the first negative yielding fixed rate euro covered bond on Tuesday, days before the European Central Bank lowered the discount rate further into negative territory.

Many other issuers, and particularly those in Germany, likely to follow Berlin Hyp's lead with negative yielding covered bond supply.

National Australia Bank has issued the second dollar-denominated Australian covered bond of the year, and the fourth covered bond in dollars this year.

Van Lanschot Bankiers mandated leads for a roadshow with a view to issuing a euro denominated conditional pass through benchmark.

Eurobank has issued its first covered bond in the private market after recently updating its prospectus. With two other major Greek banks having conducted similar exercises, the road to their rehabilitation in the capital market has become more established, despite rating downgrades.

The first negative yielding covered bond, which was issued on Tuesday by Berlin Hyp, was almost an inevitability. But given the psychological resistance and reputational risk involved in selling such a deal, the outcome was by no means a foregone conclusion. The deal's resounding success should mean more will now follow.