Covered Bonds

UBS has announced a tender offer for a number of deals including one dollar denominated covered bond. The announcement comes in response to an earlier pledge to build up its Total Loss Absorbing Capacity (TLAC), which should be credit positive for its covered bonds, even though the programme is being wound down.

Canadian Imperial Bank of Commerce took advantage of the back-up in three year euro swap yields following the European Central Bank meeting last week to issue a covered bond on Monday. The issuer paid a relatively small concession, funded 10bp more cheaply than it could have done in the dollar market and placed nearly a third with central banks.

The European Central Bank’s exit strategy from the covered bond purchase programme (CBPP3) and the form of prospective covered bond harmonisation were the main themes at this year’s third annual covered bond market conference, organised by the Association of German Pfandbrief Banks (VDP) and the Association for Financial Markets in Europe (AFME) in Berlin.

The European Central Bank failed to meet the scale of quantitative easing the market expected, though to the extent it can buy a wider range of assets, this could allow it to scale back covered bond purchases, bankers told The Cover.

The European Central Bank failed to meet the scale of quantitative easing the market expected, though to the extent it can buy a wider range of assets, this could allow it to scale back covered bond purchases under its official buying programme (CBPP3), bankers told GlobalCapital.

The French bank opened books for an eight year benchmark on Tuesday. The initial double digit spread looked generous and ensured the first covered bond to be issued in December got off to a flyer.

GlobalCapital and The Cover held a roundtable in November involving new issuers, well recognised names, a leading covered bond investor, and a Commerzbank debt capital markets executive to discuss some of the most pertinent factors affecting the covered bond market today, including relative value, the impact of the ECB’s purchase programme, issuers’ euro funding needs and their strategic marketing approaches.

Australian covered bonds, which offer among the widest spreads for the high credit quality, have been better bid in the secondary market over the past two weeks, but on Wednesday buying interest was reported further out along the curve. The news comes after Fitch and Moody’s published relatively upbeat assessments of the Australian and New Zealand covered bond markets.

South Korea’s Kookmin Bank is looking to return to the covered bond market as early as January, after hiring a bank to arrange a non-deal roadshow.

A year after the European Central Bank started buying covered bonds for its third purchase programme (CBPP3), the pool of investors that buy eurozone covered bonds has dwindled. But this provides a unique opportunity for issuers ineligible for CBPP3. Canadian banks have brought a welcome injection of attractively priced paper that has engaged a broad audience. And with CBPP3 set to continue for at least another year, the outlook for inaugural deals from new countries is promising. Euro issuance from Singapore, Poland and Turkey should soon be offering investors a broad menu of credits, at potentially interesting spread levels.

Kookmin Bank has mandated a lead manager for a US dollar covered bond roadshow. Should a transaction follow in December, it will be the issuer’s second this year following its inaugural legally enshrined deal launched in October.

The French bank opened books for an eight year benchmark on Tuesday. The initial double digit spread looked generous and ensured the first covered bond to be issued in December got off to a strong start.