Covered Bonds

The universe of Spanish covered bond issuers could be poised to expand after Moody’s assigned a provisional rating to the Cédulas Hipotecarias of Caja Rural de Castilla-La Mancha.

Stadshypotek has opportunistically taken advantage of continued demand for sterling floating rate covered bonds by issuing a benchmark on Monday. The deal was priced in line with the previous two transactions.

Kookmin Bank has abandoned immediate plans to sell the first ever Korean covered bond a few days after announcing the deal, after meeting an investor base depleted by holidays.

The European Covered Bond Council (ECBC) will present its new dual-recourse bond structure to an audience of regulators, central bank heads and other stakeholders in October – a meeting which will be a barometer of official sector appetite for backing the product.

Covered bond supply picked up sharply in July and the outlook for the remainder of the year now looks distinctly brighter.

Bankers hoped that a covered bond would emerge this week after Lower Saxony got a strong response for its deal on Tuesday. But with no hint of a euro benchmark on Wednesday, issuance hopes have been postponed until the week of August 24. The only flow is in the secondary market, and in the absence of sellers, euro system buying is causing spreads to move one way.

Covered bond supply picked up sharply in July as issuers made up for lost time during May and June. Year-to-date supply may have been stronger than at any time in the past three years but with many destabilising events on the horizon the outlook is precarious.

The amended Polish covered bond law is likely to lead to higher ratings, said Fitch on Monday. Polish covered bonds could achieve a maximum of rating uplift of 10 notches compared to two or three at the moment.

DBS managed to surprise much of the market last week when it picked dollars for the first covered bond issue out of Singapore. If the Lion City is serious about establishing a covered bond market, euros need to be the currency of choice.

South Korea’s Kookmin Bank is sounding investors out for an upcoming covered bond that’s likely to hit the market as early as this week.

The first legally enshrined covered bond from Korea is expected this week from Kookmin Bank which has signalled its intention to issue a RegS/144A dollar benchmark. The new Korean deal is a very different proposition to the other recent Asian debut, the first Singaporean covered bond issued by DBS Bank last week.

Fitch has upgraded the rating of Turkiye Garanti Bankasi (Garanti) after BBVA took a controlling stake in the bank. The rating action is likely to bode well from a credit perspective for the issuer’s forthcoming covered bond.