Covered Bonds

Calls for breathing space have not deterred issuers with Eika Boligkreditt adding its name to the heavy pipeline.

The beleaguered Austrian lender has announced the completion of its partial sale and split into KA New and KA Finanz.

Raiffeisenlandesbank Niederösterreich-Wien and Banca Carige have mandated leads for covered bond roadshows that will start in early October.

The European Banking Authority’s report on asset encumbrance, published on Thursday, says European banks’ encumbrance ratios have been relatively steady overall. But they are still high in countries severely affected by the sovereign debt crisis and should be carefully monitored, the regulator adds.

The covered bond supply outlook for the rest of the year has been revised higher by analysts but will moderate from September’s record pace.

Swedish Covered Bond Corp (SCBC) and Bankinter issued €750m covered bonds this week, but after record issuance, their limp receptions may cause others to postpone funding plans.

Bankinter repriced the Cédulas market at least 5bp wider, and its own curve by around 15bp wider on Thursday, with a benchmark five year deal. But with the longer term outlook set to improve, the transaction is expected to have tremendous performance potential.

The European Commission’s proposals to harmonise covered bond regulations across Europe could benefit the market — but will have the biggest impact on covered bond issuers from outside Europe.

The European Banking Authority’s report on asset encumbrance, published on Thursday, says that European banks’ encumbrance ratios have been relatively steady overall but they are still high in countries severely affected by the sovereign debt crisis, and should be carefully monitored.

The European Commission’s (EC) consultation on covered bond harmonisation is a realistic way forward that should help with the market’s evolution, said analysts on Thursday. The most striking proposal is a regulatory redefinition of a ‘covered bond’ which would be aligned with the Liquidity Coverage Ratio (LCR) and may result in preferential regulatory treatment for conventional deals issued from non-EEA countries.

The beleaguered Austrian lender has announced the completion of its partial sale and split into KA New and KA Finanz. The asset pools of both are high quality but the covered bond ratings of KA New look more vulnerable than those of KA Finanz, analysts said.

The supply outlook for the remainder of this year is likely to slow down, and if history serves as any guide, around the same volume of covered bonds will be issued over the fourth quarter as September alone. And since net supply will become more negative and the European Central Bank will probably double secondary market purchases, spreads should tighten.