Covered Bonds

UniCredit Bank AG (HVB) proved that investor appetite for duration is returning on Friday when it took a €2.2bn book for its eight year €500m Pfandbrief. Only two other issuers have printed this rare tenor in 2015.

The covered bond market proved itself fully open for business this week with eight issues taking in more than €7bn of orders combined.

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.

Bank of Nova Scotia, the third Canadian institution to issue a covered bond this week, took €1.25bn with its five year covered bond on Thursday. While the books were slightly slower to build than market rivals BPCE and Commerzbank, the result was still a strong one for the issuer.

Greek parliament gave bankers the result they were hoping for on Wednesday night, providing strong market conditions for two well established eurozone issuers — Commerzbank and BPCE — to issue five year bonds, taking a combined €1bn in the covered bond market. Sizable orderbooks and minimal new issue premiums proved that the market is very much in full operating mode.

Lloyds returned to covered bonds on Wednesday for its annual benchmark in euros. At €1.5bn, the five year was one of the largest this year, and with a book of over €2.5bn, it was one of the most heavily oversubscribed. The strong result was a testimony to the generous new issue premium which catalysed switching interest and caused a healthy repricing of the curve.

Euro covered bond issuance is ramping up with Westpac Banking Corporation joining Lloyds in the market on Wednesday. Despite a slower book build which drew criticism from rival bankers, Westpac took €1bn with a single digit concession.

Royal Bank of Canada was set to price its first sterling benchmark in years at a spread that is expected to lead to a re-pricing of the market, but which is close to where it would have funded in dollars. Meanwhile, CIBC will open books for its first dollar deal in four years and the first from its legally compliant programme in that currency.

Landesbank Baden-Württemberg has printed the first widely distributed euro benchmark in covered bonds since early June. Rival bankers said the deal proves that European investors are receptive to the right trade, but the Greek storm is not over yet and may mean that issuance windows are limited.

UniCredit CIB has hired a covered bond and SSA syndicate banker from Barclays.

UniCredit CIB has hired a covered bond and SSA syndicate banker from Barclays.

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