Covered Bonds

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.

Swedbank was set to issue a €1.25bn five year covered bond on Wednesday. The deal attracted more investors than any other covered bond this year, and a larger volume of orders. The new issue concession was small, but the deal’s success was driven by a yield nearly 0.5% more than OBLs

It is no coincidence that Tuesday’s €1bn covered bond from BPCE attracted more investors for a French seven year deal than at any time in the last year. The European Central Bank has started to scale back its purchases.

It is no coincidence that Tuesday’s €1bn covered bond from BPCE attracted more investors for a French seven year deal than at any time in the last year. The European Central Bank has started to scale back its purchases. The issuer also made

European Union Commissioner Jonathan Hill embraced price differentiation and product diversity in covered bonds on Monday. The speech was widely welcomed by practitioners who fear that the ambitious approach to harmonisation advocated by the European Central Bank would be disruptive, unworkable and unnecessary.

BPCE issued a €1bn seven year mortgage-backed covered bond attracting an exceptional level of subscription from a broad range of real money investors. The transaction, along with earlier deals from AIB and CaixaBank, shows that the seven year tenor is now firmly back in vogue, offering the right trade-off between duration and yield.

Abbey National's €1bn five year issued Monday was comfortably oversubscribed but exhibited some price sensitivity.

Caixabank has become the fourth Spanish bank to tap the covered bond market this year with its largest Cédulas in five years. That four borrowers have launched similar sized deals of around €1.5bn so far this year suggests volatile market conditions are causing banks to frontload their funding.

Volatility has pushed FIG senior supply to its lowest January total since 2008, but a resilient covered bond market profited from the gloom, with issuance at its strongest since 2012.