Covered Bonds

LBBW issued a six year €500m German public sector Pfandbrief on Monday, pricing in line with Berlin Hyp and Muenchener Hyp.

The UK’s Nationwide Building Society issued its fourth covered bond of 2015 which at €1bn, was larger than the other deals in the market on Monday, yet it still attracted a decently oversubscribed book even with a new issue premium that was smaller than any deal seen last week.

Santander Totta issued the second only covered bond from Portugal this year on Monday. Despite a low cover ratio the deal was diversely distributed.

When Kommunalkredit’s split into KA Finanz and KA New was firmed up seven months ago, KA Finanz’s covered bonds looked like they would fare better than KA New’s. Late on Friday this view was officially confirmed, when the issuer said it would stick with 28% overcollateralization (OC).

Barclays became the sixth bank to seek the consent of investors to switch a number of hard bullet covered bonds to soft bullet maturities. A successful outcome is likely, which will remove onerous collateral obligations under the pre maturity test.

The European Banking Authority (EBA) has recommended that the European Commission (EC) excludes covered bonds from a uniform definition of Mortgage Lending Value (MLV).

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.