Covered Bonds

The European Covered Bond Council (ECBC) has proposed a new dual-recourse bond structure to meet the European Commission’s plan for a Capital Markets Union.

Bankers are preparing the ground for the first Turkish covered bond with Akbank and Garanti Bank lining up for issuance. Pricing for both will be wide of the sovereign and the banks are preparing extensive investor roadshows. While funding officials are confident that the bonds will sell well, syndicate bankers question whether they will find a substantial buyer base.

Swedbank returned to covered bonds on Wednesday for its third funding exercise of the year, deciding to launch in Reg S format for its first dollar benchmark of the year instead of using its 144A programme. The decision came as the euro rates markets suffered a further bout of intraday volatility following last week’s instability.

More covered issuers could follow Swedbank into Reg S dollars, after the Swedish bank showed on Wednesday it was possible to get the same execution for a Reg S dollar benchmark as for a 144A covered bond.

Soaring oil prices will lead to a further rise in inflation expectations which have already begun to move in the right direction. However the ECB’s Ulrich Bindseil, director general of market operations, warned on Thursday that the central bank still had a long way to go. And though it had flexibility to buy more assets under different programmes, it is not likely to slow down the overall rate of €60bn a month. And when it comes to exiting, the process is likely to be very carefully considered.

The European Covered Bond Council (ECBC) has proposed a new dual-recourse bond structure to meet the European Commission’s plan for a Capital Markets Union.

Swedbank returned to covered bonds for its third funding exercise on Wednesday but decided against issuing off its 144A programme to launch in Reg S format for its first dollar benchmark of the year. The decision came as euro rates markets suffered a further bout of intraday volatility following last week’s extraordinary instability. And as Caffil tapped its 35s.

La Société de Financement Local (SFIL), which owns the French public sector covered bond issuer Caffil, has been given approval by the European Commission to originate and refinance large export credit guaranteed loans.

Bankers are preparing the ground for the first Turkish covered bond with Akbank and Garanti Bank both lining up for issuance.

Bankers are preparing the ground for the first Turkish covered bond with both Akbank and Garanti Bank preparing extensive investor roadshows. Batuhan Tufan, head of funding at Garanti Bank, told The Cover on Tuesday that he is confident supply will sell. However syndicate bankers question whether issuance will fit more closely with emerging market, or covered bond investor portfolios. In any case pricing is expected to be wide of the sovereign.

The relative value of covered bonds compared to sovereign bonds has improved, but the pace of European Central Bank buying has not slackened, as had been widely hoped. And even though the ECB has marginally scaled back primary market purchases this year compared to last, it remains an aggressive secondary market buyer.

Bund yields, which have soared over the past week, began to stabilise on Tuesday, leading to optimism about the return of real money to the covered bond markets.