Covered Bonds

Singapore is finally getting its first covered bond, with the Lion City’s largest bank DBS set to go on the road to gauge investor interest.

Selling pressure remains dominant across all covered bond sectors, but spreads have held in well compared to other markets, dealers reported on Wednesday. Much depends on the outlook for Greece, but so far the market has shown resilience relative to govies.

DBS is set to commence marketing the first covered bond from Singapore later this month, and on Wednesday mandated its lead managers. Two other Singaporean banks are likely to follow, but at under than $20bn, the potential size of the market much lower than Korea’s.

Following its successful March covered bond buyback, Northern Rock Asset Management (NRAM) has announced its intention to redeem its remaining two covered bonds. If successful it will no longer be a covered bond issuer.

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.