Covered Bonds

Länsförsäkringar Hypotek priced a €500m no-grow seven year covered bond with a roughly 2bp new issue premium on Thursday. This was the second covered bond not eligible for the European Central Bank’s purchase programme (CBPP3) issued this week following a deal from Abbey. The spread pick-up relative to CBPP3 eligible deals attracted a decent book and the maturity played to asset managers and central banks alike.

The World Bank Group has appointed Loïc Chiquier, chief technical officer and senior advisor of the finance and markets global practice, as its observer representative on the Covered Bond Label Advisory Council.

Fitch published a peer review of five Portuguese covered bond programmes on Wednesday, rating them all in the BBB basket. Though the quality of the cover pools is high, as reflected by one of the lowest portfolio loss rates in Europe, the risk of a disruption to the flow of payments is also high.

Non-core eurozone issuers are set to play an increasing part in the covered bond market as the European Central Bank (ECB) purchase programme drives yields towards new lows. While minimal new issue premiums and negative spreads have not yet deterred investors – oversubscription rates were up this week – bankers are debating if the inflection point is in sight.

National Bank of Canada (NBC) priced the first 144a three year dollar benchmark since July 2013 on Monday. The lack of comparable deals meant there was an element of discovery in pricing, which was almost excessively defensive. BayernLB was set to price a three year Reg S public sector dollar benchmark.

La Banque Postale printed its first soft bullet euro covered bond, paying a 0bp-1bp new issue premium for its market return, and Helaba doubled the size of its 1.875% 2023s to €1bn with a tap on Tuesday.

Abbey National Treasury Services returned to the covered bond market on Tuesday to issue the second only UK covered bond of the year in euros. The rarity of UK euro issuance combined with a constructive market backdrop and a positive spread to mid-swaps propelled demand for the deal, particularly from high quality asset managers and central banks.

Fitch Ratings may cap its highest AAA rating where rating agency removal language (RRL) is present and has sent out a request for comment.

Deutsche Hypo returned to covered bonds for its annual benchmark on Monday, building a heavily oversubscribed book for its €500m seven year mortgage Pfandbrief in a record 10 minutes.

Two European banks announced covered bond mandates on Monday – La Banque Postale in euros and BayernLB in dollars.

National Bank of Canada is on track to sell a $750m three year covered bond, its first covered bond in dollars since 2011.

Berlin-Hannoversche Hypothekenbank (BHH) mandated leads to market the first green pfandbrief, or Grüner Pfandbrief, setting the stage for further green covered bonds and RMBS due this year and next. In contrast to last year’s environmental and social governance deal from Münchener Hypothekenbank, the forthcoming transaction will be of benchmark size and will be backed exclusively by energy efficient buildings.