Covered Bonds

The Covered Bond Label Foundation (CBLF) and the European Covered Bond Council (ECBC) have announced plans to implement a common harmonised transparency template that will serve all jurisdictions. The move, which comes in response to proposals set out by the European Commission to develop a Capital Markets Union, will be a binding requirement for granting and renewing membership of the covered bond label.

A 10bp new issue premium was not enough for HSH Nordbank to attract a fully subscribed book for its €500m seven year Pfandbrief issued on Monday. Though it was cheap to the curve, the deal was much more expensive than other higher rated, shorter dated agency debt offered at the same time.

The euro market for covered bonds remained broadly steady on Monday but with peripheral sovereign debt wider again, bankers suggested peripheral covered bonds were vulnerable to a sell-off. The ultra-long end was under a bit of pressure and selective older Scandinavian deals softened as investors switched into cheaper more recently issued deals.

Daniel Loughney, covered bond portfolio manager at Alliance Bernstein in London, speaks to The Cover about the bond market rout, the outlook for rates and covered bonds, and talks about how he managed funds through the recent turbulent period.

Kookmin Bank has mandated leads for a roadshow to market the first covered bond issued under the newly established Korean legal framework. The bank, which has issued structured covered bonds in the past, is one of several that are expected to take advantage of the new law. But it had long been expected to be among the first to market, after issuing a consent solicitation in January this year.

Investors have been crying out for yield for months, and now they're available, they're not investing. Much like the Greek god Tantalus who was tormented by fruits just out of reach and water that receded before he could drink it, investors’ desire to grab for the low hanging fruit has been stymied.

Investors have been crying out for yield for months, and now they're available, they're not investing.

Toronto Dominion Bank was this week able to muster strong demand for a five year covered bond which priced cheap to Royal Bank of Canada’s seven year, which struggled.

Skandinaviska Enskilda Banken (SEB) and Swedish Covered Bond Corp (SCBC) issued covered bonds of almost identical credit standing this week, but with very different outcomes.

Compagnie de Financement Fonciere (CFF) has issued the first euro denominated three year conventional covered bond this year.

Korea is hoping to get its first taste of covered bonds since a new act came into force in April 2014, with Kookmin Bank scheduled to meet investors next week.

After the disastrous reception of Royal Bank of Canada’s seven year covered bond on Wednesday, SCBC followed with another seven year on Thursday. The infrequent issuer raised half the amount than SEB and paid 5bp more, but did the right thing by not compounding the problem left by RBC.