Covered Bonds

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.

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.