Covered Bonds

Gross covered bond supply is expected to reach €185bn globally next year, up about €10bn from 2015 and the highest since 2011, according to analysts at Barclays.

The French covered bond issuer has mandated leads for its second deal of the year and is expected to open books on Tuesday.

House prices have fallen in Singapore in the last two years, but covered bond ratings are highly resilient and have been stressed to price declines many times greater than the price falls seen, said Fitch. Bankers note that Singapore’s property price decline has been deliberately engineered and say it is one of the most regulated markets in the world.

The German government is considering new rules that would govern the regulation of loans for construction and residential properties. Though it is not clear whether the rules will become adopted, analysts at LBBW research say that if they are, they should lead to an improvement in the credit quality of Pfandbriefe.

Swedbank priced the tightest fixed rate senior bond in several months this week, but bail-in uncertainty continues to undermine asset class. Bankers are split on whether issuers can be drawn away from covered bonds, which gave almost free funding for SEB Germany on Tuesday.

SEB Germany offered the lowest ever yield for a primary covered bond when it issued a three year public sector Pfandbrief on Tuesday. But some sort of positive return was necessary, even if it was minuscule.

Bayerische Landesbank issued a well oversubscribed Pfandbrief on Tuesday and priced somewhat tighter, and with a longer maturity, than other recently issued German covered bonds.

Aegon Bank issued its first covered bond on Tuesday, a €750m five year conditional pass through (CPT).

United Overseas Bank in Singapore came one step closer to issuing the country’s second covered bond when it published an offering circular on Monday.

The European Central Bank (ECB) has tightened collateral rules affecting the use of self-issued retained covered bonds in a move that is likely to encourage public issuance.

Turkish covered bond issuers have a tough slog ahead if they want to sell covered bonds denominated in euros to the established European covered bond investor community, a recent survey conducted by Natixis research suggests.

The South African Reserve Bank (SARB) will consider the possibility of introducing a covered bond framework, something that it had vehemently rejected four years ago.