Covered Bonds

The German issuer mandated joint leads for a seven year €500m no grow mortgage backed Pfandbrief on Friday for likely issuance on Monday.

After a week of no euro issuance the primary market in euros is likely to pick up next week, when staffing levels should be back to normal. A mandate decision on a Nordic deal is expected on Friday afternoon and other core euro issuers are close to pulling the trigger. The dollar market remains open despite doubts over the depth of demand in the last deal from Bank of Nova Scotia.

The primary market in covered bonds was active this week, but not in its staple euro market. Canadian issuers came to the fore, supplying benchmark deals in sterling and dollars.

Berlin-Hannoversche Hypothekenbank (BHH) mandated leads to market the first green pfandbrief, or Grüner Pfandbrief. More green covered bonds and RMBS are on the way.

The bullish tone in covered bonds continued on Thursday with successful senior unsecured and corporate deals buoying supply hopes for next week, which bankers expect to be busy.

The Bundesbank and European Central Bank have been actively lifting offers in Austrian covered bonds, with all bar one credit performing strongly since the end of March.

Toronto Dominion issued the ninth sterling denominated covered bond of the year on Wednesday, and the third from a Canadian bank in the three year floating format. The transaction provided better executable funding than it could have achieved in dollars or euros. The issuer followed Bank of Nova Scotia, which on Tuesday priced the third Canadian dollar benchmark of the year, funding more cheaply than was possible in euros.

Primary activity in covered bonds is expected to resume on Wednesday, with high hopes that a deal will be announced later on Tuesday afternoon. Though the secondary market is quiet, bankers reported a much better tone into the close of last week as offers were lifted in recently underperforming deals.

Berlin Hypothekenbank has mandated joint leads for a European roadshow to market the first Green Pfandbrief.

Global covered bond issuance in the first quarter of 2015 was the best in three years, and annual issuance is on course to reach the €150bn high end forecast made by Barclays’ analysts in December. The improvement, which was enabled by the European Central Bank’s purchase programme, was driven by non-core supply, which stood at its highest since 2009.

A pickup in primary market activity continued apace on Wednesday when Stadshypotek sold the sixth dollar denominated covered bond in the US this year.

Northern Rock Asset Management (NRAM) made a tender offer for its €2bn 3.875% November 2020 covered bond and intends to pay a 2% tender premium if investors surrender their notes before 4pm on April 17.