Covered Bonds

Aktia Bank has agreed to buy the remainder of its subsidiary, Aktia Real Estate Mortgage Bank (Aktia REMB), by 2017. As a result Finland’s savings banks will refinance their own mortgages by establishing a new covered bond issuing institution, expected to be called SP Mortgage Bank, which will start issuing from next year.

A Berlin Hyp €500m five year was the success story of covered bonds issued this week from banks in the eurozone, standing out among deals that also included bonds from Caisse Francaise De Financement Local (Caffil) and Raiffeisenlandesbank Niederösterreich-Wien (RLB-NW).

Bank of Ireland and Caja Rural Unidas issued this week’s only two covered bonds from Europe’s periphery, both offering attractive concessions.

Covered bonds issued this week by Nordea Finland and DNB Boligkreditt went surprisingly well as, despite being the largest ones on offer, they were the most highly oversubscribed and subsequently posted the best performance.

Belfius Bank is preparing to launch the first Belgian RMBS deal since 2006. The launch of the deal is set to coincide with the National Bank of Belgium taking up its role as a Eurosystem asset manager executing purchases from October 27, a move which should guarantee a large domestic bid.

Bank of Scotland's £900m equivalent triple currency denominated deal marked a successful return to the UK RMBS market for the issuer after a four year absence. The deal sends a positive message to the market that there is demand for UK RMBS assets, at the right price.

Caja Rurales Unidas issued a €750m five year deal on Thursday, building a slightly oversubscribed book in a short time frame by offering a relatively attractive new issue premium.

South Korea’s first legally enshrined covered bond was priced by Kookmin Bank on Wednesday. The transaction had first been mooted in June, but since then it benefited from the inclusion of transfer and convertibility (T&C) risk mitigation clause that enabled the bond to be rated triple-A.

Berlin Hyp’s €500m five year mortgage backed Pfandbrief issued on Thursday ranked as one of the more highly oversubscribed deals of the year from Germany and broke a succession of barely subscribed German covered bonds that had been issued over the past six weeks.

The bank for Germany’s medical profession may be small, but it is very well capitalised, its rarely issued covered bonds are highly overcollateralised, and the top rating is exceptionally well protected. The bank is due to start roadshowing from Friday.

South Korea’s first covered bond under its new rules finally came to fruition with Kookmin Bank selling a long awaited offering that had been in the works since June. But the delay proved worthwhile as the sovereign rating upgrade in September allowed the borrower to win over investors.

This week’s two largest covered bonds, from Nordea and DNB Boligkreditt, have performed well, with investors actively lifting offers on Wednesday. And with the European Central Bank expected to take an accommodative policy stance at next week’s meeting, the near term outlook is looking good from both the investor and issuer perspectives. Further issuance is expected on Thursday and early next week.