Covered Bonds

Bankinter has priced the fourth peripheral covered bond of the week, the longest from a peripheral issuer since mid-April, and the most oversubscribed in the seven year tenor since early March. The evident success removes any lingering doubt over peripheral banks’ access to capital markets following the re-emergence of the Greek debt crisis.

Landesbank Hessen-Thüringen issued a four year mortgage backed Pfandbrief on Wednesday, meeting its targets for size and spread. Bankers were hopeful that more covered bonds would emerge on Thursday, as conditions were good for both core and peripheral names.

Credit Foncier de France is out with its second RMBS of the year. CFHL-2 2015 may not come with the special regulatory treatment of the issuer’s covered bonds, but the deal offers a spread that looks particularly alluring for the risk. A major investor of covered bonds and securitizations said RMBS offer far better risk return than covered bonds, and chastised fellow investors for their lazy approach to assessing credit risk.

Following successful deals from Berlin Hyp on Tuesday and Helaba on Wednesday, two more German issuers have mandated leads. WL Bank and Deutsche Pfandbriefbank (Pbb) are expected to open books on Thursday, respectively for five and seven year benchmarks.

Royal Bank of Canada has opened books for the second US dollar denominated three year floating rate note this year following Westpac’s lead, and Helaba has mandated banks for its second euro denominated benchmark of 2015.

Banca Popolare dell'Emilia Romagna’s (BPER) and Banco Popular Español’s (BPE) five year bonds enjoyed equally good receptions, even though BPER’s Italian covered bond came at half the spread and with a much lower rating than BPE’s Spanish deal.

Berlin Hyp (BHH) priced a €500m three year Pfandbrief on Tuesday, of which nearly half was sold to international investors. The broad distribution, which came as a positive surprise, suggests an overriding investor need to shorten duration, which in turn implies fear of further volatility this year.

Banco Popular Espanol has mandated leads for a long five year Cedulas benchmark, the second from Spain in that maturity this year.

AIB Mortgage Bank has priced its second covered bond of the year, and in contrast to the last Irish covered bond deal, it enjoyed a stronger reception which was particularly helped by a big improvement in the spread over Irish government bonds as well as a repricing of the market.

Spanish and Italian covered bonds now account for sizeable portion of the total amount of covered bonds that are eligible for inclusion in the highest category of the liquidity coverage ratio said Natixis research analysts who have published a handy reference guide.

Covered bond issuers have provided more than €7bn of supply this week after a moribund spell, proving themselves to be more nimble and opportunistic than perhaps ever before.

Time is up for the covered bond lemmings. They’ve had it too easy for too long. Gone are the days of pricing a covered bond exactly where your neighbour wished they had printed theirs. Issuers need to be nimble and bankers insightful.