Covered Bonds

Berlin Hyp has mandated leads for its third covered bond of the year but its first with a five year maturity.

Korea’s Kookmin Bank has opened books for the first legally enshrined Korean covered bond. The transaction, which follows programme upgrade to triple-A from both Moody’s and Fitch, will be in dollar fixed rate format and is expected to offer a moderate spread pick up to where Royal Bank of Canada issued a five year deal last week.

South Korea is set to see a long awaited covered bond this week, with Kookmin Bank finally starting to take orders for what will be the first such issuance since the government enacted new laws last year.

This week began with three small euro offerings on screens from Landsbankinn, Carrefour Banque and NordLB as investors and issuers remained defensive after a recent run of gains in equities was met with a loss on Monday.

The German covered bond market is set for expansion, with the little known Deutsche Apotheker- und Ärztebank appointing leads for a roadshow. At the same time, another small German covered bond issuer, Pforzheim Calw, opened books for a sub-benchmark sized deal to be priced Wednesday.

Raiffeisenlandesbank Niederösterreich-Wien AG issued a €500m long five year covered bond on Tuesday and despite its attractive new issue premium, which led to a repricing of the issuer's curve, the deal was only moderately oversubscribed.

Caisse Francaise De Financement Local (Caffil) did well to raise €1bn for its fifth benchmark of the year. And by not squeezing the last basis point it managed to get the first properly oversubscribed deal of its last three.

DNB Boligkreditt issued its first euro-denominated deal of the year which, by virtue of not being eligible for CBPP3, was priced attractively and drew a deep pool of demand from broad range of investors.

Caisse Francaise De Financement Local (Caffil) has mandated leads for seven year covered bond, its fifth euro benchmark of the year. The announcement caused dealers to mark French covered bonds a little wider and suggested that, while market conditions have improved from last week, they are still a bit shaky.

Bank of Ireland returned to the euro covered bond market for the third time this year to raise €750m on a comfortably oversubscribed book. Though cheap by historical standards, the hefty new issue premium left some unconvinced about the market outlook.

Nordea Finland returned to the covered bond market on Monday to issue a €1.25bn seven year. In contrast to other recent deals, the transaction attracted solid demand of over €2bn from a wide range of investors and sets the stage for follow-on issuance.

The primary market is expected to pick up next week as a number of issuers will have finished roadshows and core issuers, possibly including some Nordic names, will return. Though dealer inventories are still high, they are falling thanks to improved central bank purchases which have helped to stabilise spreads.