Covered Bonds

Yorkshire Building Society showed RBC how to syndicate a deal on Thursday, choosing a maturity, size and spread that made sense from the start.

Singapore is on course for its first covered bond after the country’s regulator published feedback from a market consultation.

Royal Bank of Canada incurred the wrath of the market on Wednesday when it issued a €1bn deal from a €750m book. The spread, which offered an insufficient concession to Toronto Dominion’s earlier deal this week, widened by 4bp and caused the market to widen 2bp. At the same time Bunds fell sharply, suggesting the seven year may no longer be the market’s sweet spot.

Emerging market covered bonds may be one step closer with developments to the covered bond laws in Egypt, Poland, Slovenia, and Romania emerging this week.

SCBC mandated leads for a seven year covered bond on Wednesday, the second in that tenor from Sweden and the third in that tenor overall this week. The transaction comes as RBC struggled to build strong demand for its seven year after Bund yields soared. Yorkshire Building Society has responded to concerns around volatility and mandated leads for a shorter maturity.

Skandinaviska Enskilda Banken returned to the covered bond market on Tuesday after an 18 month absence to print a €1bn deal with a longer maturity, tighter spread and lower new issue premium than Toronto Dominion was able to do a day earlier.

The European Central Bank moderated covered bond purchases in its latest reporting period. While this was welcome news, analysts doubted the central bank had begun to taper purchases in earnest.

Royal Bank of Canada mandated leads for a seven year euro benchmark covered bond on Tuesday. The announcement comes a few hours earlier than usual and should give investors more time to consider the transaction which, if history is any guide, may be in a large benchmark size.

Compagnie de Financement Fonciere (CFF) has issued the first euro denominated three year conventional covered bond this year. Until recently, short dated covered bonds were trading with a negative yield in euros, something which made them impossible to sell. CFF’s trade has proved that this tenor is now open.

Skandinaviska Enskilda Banken AB (SEB) has mandated leads for its first covered bond since October 2013 and the third only Swedish deal to be issued this year. The deal is likely to offer three times the coupon of the previous Swedish covered bond.

Toronto Dominion was set to price the first covered bond of €1bn or more in nearly six weeks on Tuesday. The five year transaction, which was expected to offer double the coupon of its previous seven year launched in mid-April, was being closely monitored by a number of other issuers who are aiming to launch deals before the onset of summer.

Singaporean covered bond issuance could soon be on the way after the country’s monetary authority, MAS, published feedback on the updated regulatory guidelines it proposed in January. The first deal from DBS could emerge in weeks.